Budgeting and Getting Control of Variable Income and Expenses

Budgeting fixed expenses like your car payment every month is relatively straightforward. It is the variable expenses that are a budgeting nightmare at times and probably the biggest reason our personal budgeting plans are given up on. The key to budgeting variable expenses is to try and make them like fixed expenses through estimating, buffering, and limiting. Here are some points to consider:

Quickly build an emergency fund to draw from to handle fluctuations. Different sources will recommend different emergency fund amounts. Probably an emergency fund of 2-3 months expenses would suffice although you might not be able to come up with that quickly. The point is that you should build a buffer fund large enough to be able to draw from to make variable income and expenses as closed to fixed as possible and simplify your budgeting plan.

In your budgeting plan, try to use cash to pay variable expenses. If you have that buffer fund built sufficiently, you should be able to only pay the variable expenses in cash. What is even better is if you can put an upper limit on how much cash is used to fund the particular variable expense category.

Prioritize bills that must be paid and when they need to be paid in order to avoid late fees. Of course this is a basic budgeting step but it is also designed to help you avoid late fees which can be a budgeting killer when it comes to variable expenses and trying to get out of debt. Order your bills by their due dates and then further order them by the absolute day you must pay them in order to pay them on time. Some use automatic debits from their checking account. However if you are living on really tight budgeting restrictions because of money problems make sure you have a buffer amount in your checking account. Overdraft fees can be a budgeting plan killer too.

You can do a forward estimation of utilities and make adjustments as you go. Many public utilities have websites these days where you can go online and retrieve images of your past bills for six months to a year. If you can go back a year, you can analyze your usage during the summer and winter months and try to estimate what your bill will be for the same time period in the current year. Or, use your emergency monetary buffer to level out the budgeted expense amount throughout the entire year. It is like trying to make a variable utilities expense into a fixed expense based on estimation and past trends.

Try budgeting your gasoline expense and using public transportation to avoid budget overruns. Our automobiles are some of the biggest money guzzlers in our households today because of high and fluctuating gas prices. It is important to collect statistics as to your gasoline use in the past and try to estimate your future usage. If you are having real problems budgeting gasoline and other automobile-related expenses then you might want to allocate a fixed amount for gasoline and when it runs out in the month, switch to public transportation if you can. If you run out often before the month is over then you might want to begin budgeting more for the expense if possible. And, if you are having significant financial problems, you might consider selling your second car if you have one and saving the money. Sometimes, if you really look closely, you can get rid of the second car and either share one car with your spouse by the two of you carpooling to work or one of you can switch to public transportation.