Identifying all expenses is crucial when preparing a budget. If you miss expenses when you first prepare your budget, you'll blow it. That's not a major drama & there's another article in this series on how to manage budget blow out. However, if you can get it right in the first place, you won't need to refer to that article at all!
There are essentially 3 types of expenses:
Fixed Expenses - those which are almost impossible to avoid & difficult to cut down - examples are car registration, mortgage payments, electricityVariable Expenses - those which make life more enjoyable & are largely a choice, but can vary - examples are health insurance, gym memberships, haircuts, clothes, mobile phones, internet etc
Optional Expenses - your fun money - examples are alcohol, entertainment, eating out, lunches, coffees, magazines, take-away etc
We need to try & find all expenses across these categories.
Here are a couple of simple budgets how-to tips to catch them all:
Fixed & Variable Expenses:
Get out your last 3-6 months worth of bank statementsIgnore any cash and cash card transactions for discretionary spending (e.g. lunch, magazines, take-away etc)Use a highlighter to mark all bill payments which are being automatically being from your accounts on a regular basisGet a second highlighter colour & mark any irregular bills - these may include car registration, electricity, taxes & duties etcFinally look for all other expenses - haircuts, petrol, clothing etcDiscretionary Expenses:
Buy a tiny pocket notepadFor the next month, write down every single cent you spendTry not to change your spending habits, just record themSome of these will fall into 'Variable' Expenses - just record them all for nowMaking sense of it all:
Get yourself a budget template. There's a free one available on our website.The budget template should prompt you for most of the expenses you've managed to uncoverEnter & add them up as appropriateMethodically go through your notebook & highlighted expenses, to make sure you don't double any upAlmost certainly you'll find the budget template prompts you for expenses you'd completely forgotten about. Go to work to find out how much you spend on those.This is probably the most labour intensive part of the budgeting process.
However, of all the articles in this series, THIS is the one you want to absolutely make sure you follow to a tee!
The benefits you'll reap for doing this work diligently will be more than you can imagine:
You will greatly reduce your chances of budget blow-out and hugely increase your chances of budget success.You will reduced budget frustration and enjoy a bigger sense of achievement.Your budget will actually work!When it comes to making sure you uncover all hidden expenses, the old quote:
"The labours are few, but the Harvest is great", certainly applies.
Putting the effort into identifying ALL expenses is a huge advantage and you will take a giant leap forward on your path way to financial success.
So get stuck into it!
Wishing you much Prosperity, Miriam
Miriam Castilla's passion is teaching people how to be money smart.
Discover a quick & easy system which puts an end to financial stress, starts saving your money and run your budget on auto pilot. Download your Free Budget Template & learn How To Be Money Smart here. Be sure to visit the Budgets How-To Blog for lots of juicy budgeting & saving tips!
Here's to YOUR Financial Success!
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