I recently posted how to budget for variable income. Now I want to discuss a related subject, variable expenses. Budgeting for variable expenses frustrates people just as much as inconsistent income.
I have noticed since starting zero based budgeting that my fear of variable expenses has dramatically decreased. I attribute most of this anxiety decrease to gradual learning about where I spend my money. Each budget that I go through teaches me a little more about my routine finances and gives an idea where to make adjustments in future budgets.
There are of course many others, but those listed above apply to a large amount of people.
Groceries are probably the easiest to control. You know exactly how many mouths you have to feed and you typically know how many days you do that for. In my case, it’s 5 mouths and a two-week pay period. What you do not know are the variances in price, what’s on sale, etc.
My wife does most of our grocery shopping, but I know at this point, she can predict her shopping trip within a few dollars. She typically shops at the same stores and has a base group of groceries that she buys. She takes advantages of sales, uses coupons when possible and buys in bulk where she can.
Of course it did not start this way. I would say it took a few months for her to get in a groove with the grocery bill. For your first zero based budget, try to look back at the last month and see what you spent on groceries. Use that number as a basis for the first couple of budgets. Each budget that passes, look back and adjust. Eventually you will start to see a pattern. If you have no idea, or you know you want to stay under a certain amount, make it so. Set the number and stick to it. The easiest way I’ve found to stick to a grocery budget is to pay in cash. See my article “Cash for Gas” to learn why I say this.
Gasoline is much like groceries. After each budget period, you will start to see a pattern for how much gas gets you to all the places you go. Make sure to account for any trips that you know are in the pay period. If something comes up and you haven’t budgeted for it, don’t sweat it. Just look back at your budget and find a place to adjust. If you can’t find an adjustment that works… don’t go.
Medical expenses are the most difficult. People don’t get sick on a schedule. The best way to deal with this is to start putting away savings for unexpected medical expenses. Every budget, put away whatever you feel is necessary to help when a medical situation arises. Each budget that passes with no medical expenses gives you that much more freedom from an unexpected bill.
Electricity can also be tricky. But one thing is for sure, you will use more in the summer and winter. Most power companies have an “average” plan where they try to average out your usage and make you pay the same bill each month. I don’t really believe in these programs, however people who are not good at preparation saving might benefit. For people who do preparation save, figure out how much your electricity costs were over the last twelve months. Pay your bill on the cheaper months and put away extra for the bigger months coming.
The key to take away from this post is that even expenses that you consider inconsistent and variable do have a pattern. It’s just not an exact or obvious one. There are a lot of best guessing and estimating to do. But the best part is, you can always adjust.