How do you budget for your variable bills? This includes things like electricity, gas for your house and your car, and medical expenses. You know that these bills come in every month, but they may change according to the weather, the price of the item or circumstances completely out of control. So how do you decided how much to budget each month?
There are two schools of thought on this matter. The first is that you look at your records for the past year and add up the total. You divide that number by twelve. Then you budget the average and roll over the extra to cover the more expensive months. In order for this to work well, you need to be very disciplined to not overspend in other categories. If you use the extra money to cover other expenses you will be hurting when a higher bill comes through.
Another way to budget is to budget for the highest amount in a twelve-month period. If you do this you should rarely be surprised. You will often have extra money left over at the end of the month. If you are working on a debt snowball then you can apply the remainder of the budgeted amount to your snowball. If you are debt free, it is an easy way to save some extra money most months.
You may want to sign up for budget billing to help you plan as well. This is available through many utility companies. It is important that you read the fine print and understand what you are signing up for. You need to be prepared to pay any overages at the end of the year.
Variables can be tricky items to include in your budget, but you can plan around them. You can do this with other optional variable expenses as well. For example you can budget to cover swim lessons, or sports teams throughout the year, even though fees are only due a few times a year.
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