Creating a Budget: 5 Categories Not to be Forgotten

I was super excited when my friend Maria offered to write a guest post.  She and her husband paid off over $300,000 in less than 5 years to own their home mortgage-free.  She’s an amazing writer who founded the blog Handful of Thoughts. She’s also my go-to resource for all things Canadian personal finance. That’s enough from me. I’ll let Maria take it from here. 

Have you tried creating a budget but still run out of money before the end of the month? The solution could be as simple as remembering to include one or all of these 5 often forgotten budget categories.

Don’t complicate your budget

Complicated MathWhen it comes to creating a budget, there are many different ways you can go about it. But there is one thing every budget has in common. The goal of every budget is to keep track of your money coming in and your money going out.

A budget can be very liberating. Creating a budget is a way to kick-start your financial health and to tell your money where to go.

Don’t overcomplicate your budget. A complicated budget is one nobody wants to follow. Keep your budget simple to help ensure success.

But if your budget has holes or does not account for all your expenses then it can evolve into a waste of time.  A budget’s effectiveness comes from its completeness.

So in an effort to help you create a simple budget that encompasses all of your money transactions, in no particular order, here are 5 budget categories that you may be forgetting.

1. Fun Money

Travel, entertainment, and eating out are often categories included in most budgets.  But the fun money category does not necessarily include these transactions.

The fun money category is a cash category. It includes all those minor expenses that come up throughout the month that you would normally pay cash for.  If you have a shared budget with someone, then the fun money category is even more important to include.

With a shared budget, decide on a certain amount of fun money for each month. At the beginning of each month, withdraw this amount in cash.  This cash can now be spent however each person decides to spend it. There is no further accountability or having to “ask permission” from the other person.

The accountability for fun money in your budget comes from the cash withdrawal; after that, it can be spent, however.

If you have disagreements in your relationship on how money should be spent, or if one of you is a saver and the other a spender then fun money may be the solution to your problems.  Personally, fun money has changed my life and is an expense we now always include in our monthly budget.

2. Annual Fees

Annual fees are another category that often gets missed when creating a monthly budget.  These fees may include annual credit card fees, annual park passes, or roadside assistance memberships.

It is easy to miss annual fees if you only track your expenses for a few months.

There are a couple of ways you can deal with annual fees in your budget.  You could divide the annual fee into 12 and then set aside money for it every month. Or you could have a different budget for each month and then account for it in that month’s specific budget.

Sometimes these fees occur on automatic payment, like with a credit card annual fee.  So if you are not paying attention and tracking your expenses, you could very well miss these payments.  Not accounting for annual fees can easily lead to running out of money before the end of the month.

3. Long Term Home Maintenance

If you are a homeowner, forgetting to include long term home maintenance in your budget could eventually cause you problems.  This budget category refers to home maintenance that doesn’t need to happen for the next few years and is often a big-ticket item like replacing shingles on a roof.

Again, there are a few ways that you can handle this expense in your budget moving forward.  One option is to ignore it altogether. Then when that repair comes due either pay for it out of your emergency fund or on credit.  This is the option that is the least desirable.

A more proactive approach would be to estimate the cost of the expense and the time frame that it will be required.  Then divide the time by the amount of money required and begin to set aside money every month for this big-ticket expense.

For example, if you know that your furnace will have to be replaced in at least 5 years and that a new furnace will cost $5000 then you would start putting aside $1000 a year, or approximately $85 a month, for the next 5 years.  Put this money in a high-interest savings account and it will grow with interest every month too.

When the time comes for you to replace the furnace you should have the money saved up so that it won’t affect your regular monthly budget. This forward-thinking is a smart money move that will help you feel in control of your finances.

4. Bank Fees

Bank fees are another silent killer to budgets. Many personal bank accounts come with monthly fees in order to carry out day to day transactions.  Some banks even charge extra fees for overdraft or if you have more than a minimal number of transactions a month.

There are 2 ways of dealing with forgotten bank fees in your budget.  First, you could look at the bank fees you have been paying for the past few months and include an average of them in your monthly budget moving forward.

Or, better yet, you could look for a bank that has no fee for personal accounts.  Often no-fee bank accounts are online bank accounts that can save money by not having brick and mortar locations.

Online banks are usually insured just like the big banks, and in my experience, offer better customer service without the annoying bank fees.

5. Pet Medical Expenses

This forgotten budget category, for obvious reasons, only applies to pet owners. Pets can be very expensive, but one aspect of pet ownership that is often forgotten is pet medical expenses. Major surgery or cancer treatments for pets can cost more than thousands of dollars.

I’m not suggesting you should or should not get pet insurance, that information is beyond the scope of this article. But if you are a pet owner, researching pet insurance may be worth your time.

Whether you decide to go with pet insurance or not, there will always be a cost associated with medical fees for pets. Including pet medical expenses as a budget category will help you have a plan for these costs.

And having a plan means that should your pet have a medical bill the cost of it will not break your budget or force you to go into debt.

5 Budget Categories not to Forget

Final Thoughts

No matter what type of budget you decide to create the success of the budget will rely in part on its completeness.  If you have tried creating a budget in the past without success, look back and ask yourself, did you include these 5 often forgotten budget categories?

If you have forgotten any of these 5 budget categories, then including them could be the simple fix to your budget that you’ve been looking for.

But maybe these 5 forgotten budget categories are not the solution to your budget woes.  In that case, maybe it’s time for a budget review.

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  1. Roger Fox | 10th Jun 20

    I have to say that this is a vital guide. Thanks for sharing!

  2. Maria @ Handful of Thoughts | 26th Jul 20

    Roger – thank you. Hopefully, this highlighted a few areas in your budget to remember.

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