I had a client post on my Facebook page asking about how to budget for fluctuating expenses like utilities. This is a great question. So often we’re asked to budget and those expenses are treated like they are constant. And for some people they are. Water, sewer and trash were included in the rent of my first apartment in Seattle so I only had to worry about my changing electricity bill. Now all of my utilities are separate and while similar from month to month can still change dramatically.
You have 2 main options here: make the amount you budget for vary from month to month or make the amount constant from month to month.
You’ll have to do some research for this to be most accurate. Start by assembling your utility bills. I keep mine from the last year for exactly this purpose and so boyfriend and I can compare our usage from year to year and how much our utility prices are changing. You can take March 2011’s bill and make that amount how much you’ll budget for in March 2012 and go through the rest of the year. If you don’t have your bills still, you can call or email your utility company and most can email you your last year’s usage or you can go through your bank statements and see how much the checks were that you wrote to them.
Of course now you’re writing down all your expenses so you’ll never have to do this again.
The second option still involves assembling all your utility bills from the last year. Now instead of making it a varying amount from month to month, you add up all your bills, divide it by the number of months you have assembled and make that amount constant from month to month. So you know that some months you’ll go over and some you’ll come in under, but overall you’ll have the proper amount saved up and ready to go for future bills. This is how I personally operate, but the cash flow I keep reflects a fluctuating amount. I’ll go into sickening detail about cash flow another day.
What are some other fluctuating bills you have? I know every month numbers will be slightly different, we’re not robots after all. But are there any bills or expenses you have that you know can vary greatly from month to month?