Note to subscribers: My apologies. I inadvertantly attached the wrong file to the column I distributed this morning. This version contains the correct attachment.
My wife and I have a budget. On paper, we should be saving $200-400 a month, but usually unexpected bills prevent us from saving anything. Any advice?
What you're describing are "occasional expenses." And they're often the forgotten step in setting up a household budget.
Occasional expenses are bills and other expenditures you don't pay every month. For example, some fixed bills such as insurance and property taxes are often paid every three or six months. In addition, "flexible" occasional expenses include clothing, gifts, school supplies and similar items. If you don't set aside money for occasional expenses, paying those bills can put a severe dent in your savings.
The answer is to set up an "Occasional Expense Fund," and make sure enough money goes into it each month. To determine how much that is, you'll have to put pencil to paper.
For fixed occasional expenses, just write down a month-by-month list of those bills (insurance, taxes, subscriptions, memberships, etc.). For flexible occasional expenses, you'll have to do some estimating. Home and car maintenance bills, out-of-pocket medical expenses, holidays and gifts, shoes and clothing, furniture, travel, education and similar items all need to be tracked. When you're first setting up your Occasional Expense Fund, you can use educated guesses for these items. But over the year, jot them as they occur to help you refine next year's budget.
Once you have listed all of your occasional expenses for a year, add them up and divide by 12. That tells you how much to save each month in your Occasional Expense Fund. That should become a line item in your budget.
Starting such a fund can be tricky. Some people start it during a few months when expenses are relatively low, allowing it to build up over time. But you may find you need to "seed" the account with some extra money up front --- from a garage sale or a tax return, for example.
Managing this type of fund can take a number of different forms. Some people just deposit the money in their regular savings, drawing it out as needed. Others start a new savings or checking account just for occasional expenses, making it easier to keep track of the account's status. If you decide to open a separate account, be sure to inquire about fees.
To help you keep an accounting of your Occasional Expenses, you can download a free worksheet from Ohio State University Extension's "Manage Your Money" self-study course. A one-page PDF file is available at http://ohioline.osu.edu/mym/mym_5c.pdf.
That might inspire you to do the entire Manage Your Money course, completely available online at http://ohioline.osu.edu/mym/, or available in print form for a reasonable fee from county offices of Ohio State University Extension. Your budget will thank you.
Family Fundamentals is a monthly column on family issues. It is a service of Ohio State University Extension and the Ohio Agricultural Research and Development Center. Send questions to Family Fundamentals, c/o Martha Filipic, 2021 Coffey Road, Columbus, OH 43210-1044, or filipic.3@cfaes.osu.edu.