6 Surprises That Can Derail Your Budget

We're prepared for the usual monthly expenses, but these ones can catch you off guard.

Creating and sticking to a budget is key to accomplishing your financial goals. By taking a critical look at your cash flow and monthly needs, you can plan ahead for future purchases and create a healthy savings account.

When creating a budget, most people start by looking at their paychecks and their ordinary expenses, such as utilities, groceries, and gas. That's a good place to start, but there are additional expenses that can derail your budget and leave you feeling frustrated.

1. Quarterly and annual payments

A major source of frustration for budgeters is forgetting to include quarterly and annual payments. If you created your budget by looking at your typical monthly bills, there's a good chance you forgot payments like insurance, property taxes, and car registration fees.

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These payments can set you back hundreds of dollars, so it's important to include them in your initial budget. An easy way to do this is to add up all your annual and quarterly payments and divide them by 12. Then work that number into your budget each month.

While it may look more appealing at first to make monthly payments for things like car insurance, you're usually paying an additional fee or missing out on discounts. Some car insurance policies will knock $50 to $80 off your bill for paying the total amount due up front. When you're on a budget, that money could go toward clothing or meaningful gifts throughout the year.

2. Utility bill increases

Depending on when you made your budget, it's likely you forgot to factor in rate increases for your utility bills. Hot and cold months can make a big difference in your electricity bills and put a dent in your budget. If your HVAC system is working overtime, you could see an increase in your bill of $50 to $100.

To help prevent rate hikes due to changing seasons, see if your energy provider offers budget billing. They'll take a look at your projected or past energy usage throughout the year and adjust your monthly bill to a set amount. Some energy providers charge minimal fees to enroll in budget billing, so make sure you read the fine print. 

If you decide not to enroll in budget billing, you can create your own estimate by looking at the past year's energy bills, dividing by 12, and working that number into your monthly budget.

3. Gifts

In addition to utility rate hikes and annual payments, another area of your budget that can make you fall short is seasonal and event-related gifts. We can't all be DIY and crafting masters, which means most of us need to purchase gifts for holidays, birthdays, and special events like weddings.

The average person spends over $650 on holiday gifts alone, according to Alliant Credit Union. While that number might be high for you, it's a great idea to set aside $50-$60 each month. That way, you'll have enough money to provide thoughtful gifts without stretching yourself too thin.

It's also a good idea to break gift-giving into separate categories in your budget. If you know you like to spoil friends and family over the holidays, create a separate portion of your budget just for holiday presents. 

4. Unplanned splurges

Just as it's important to plan ahead for the gifts you give others, you should also plan for the gifts you give yourself. Living on a budget doesn't mean you can't have fun and enjoy the money you earn. Finding room in your budget for these things can provide you with much-needed self-care. Just make sure you're not overdoing it.

Start by identifying the things you treat yourself with the most, including meals out with friends, date nights, and entertainment like concerts or theme parks. Separate each purchase into its own category and set a spending limit that you know you can realistically stay under.

If you know you're an emotional spender, find the day of the week when you usually experience the most stress and plan to buy yourself that coffee or other pick-me-up that day.

5. Wardrobe updates

While clothing might not be a major part of your budget, you're likely to need a few items a year at the very least. You can, of course, frequent discount stores and thrift shops, but it's also comforting to know you have room in your budget for quality clothing for an upcoming interview or special event.

This is one of the easiest expenses to forget in your budget, because you don't always foresee the need to either purchase or upgrade the basics. The smartest way to add clothing into your budget is to set aside a small dollar amount each month and let it add up to cover clothing purchases once or twice a year. That way, you'll be able to build a quality wardrobe over time without going overboard.

6. General emergencies

While nobody likes to think about emergencies, it's crucial that you plan ahead for big expenses that come out of nowhere. Fortunately, making sure you set aside enough money for emergency spending can be as easy as taking a look at your existing major expenses, like your car or home.  

If you own a car, plan to pay for things like auto repair, tow fees, and new tires. If you're a homeowner, make sure you budget for plumbing fixes and air conditioning repair. Even if you rent, you'll want to plan ahead for needing new appliances like a microwave or TV. You can get fairly accurate estimates for repair costs or new appliances by researching local repair rates and retail prices.

Customize your budget

No matter how much money you're pulling in each month, it's important to make sure your budget reflects your bills as much as it does your creature comforts. Don't be shy to customize your budget and make categories that reflect your needs as well as your wants.