Forecasting Expenses

by Matthew Perry
(last updated February 21, 2009)

It's natural to worry about expenses when you're creating a personal budget. The uncertainty of the future is a big stress factor: Will your car break down? How much electricity do you really use? Wait––isn't your sister's birthday next month? Would-be budgeters often stop before they start, overwhelmed by the stress of reading the future. While it may be natural to worry, that doesn't mean it is necessary. With proper expense forecasting know-how, you needn't worry about having a drastically under-funded budget.

You almost certainly have some fixed expenses, and those are a solid place to start. Rent, for example, is generally the same from month to month, as are car payments, bus passes, and mortgage payments. The certainty of these expenses can make it easier to deal with the unknown ones, not only because it gives you a concrete base for your budget, but because your income with those expenses subtracted will probably leave you with significantly less money to distribute. Most people probably wouldn't see that as an advantage, but it is—as long as it's not too tight, it's easier to budget a smaller amount of money than a large one.

The money left over from your fixed expenses will then be divided among the other categories in your budget, your variable expenses. These tricky little devils tend to be different from one month to the next, so they can be hard to estimate. If you've kept records of your spending for the last month (or the last several months) you can average those to give you general guidelines for the coming month. You'll probably eat close to the same amount of food, for instance, even if it's not exactly the same.

It takes practice to get good at predicting your expenses. As you use your budget, you may find that you have too much money in some categories and not enough in others, but don't give up. Taking control of your finances is worth the work.

Author Bio

Matthew Perry

MORE FROM MATTHEW

Reducing Bank Fees

Tired of being "nickel and dimed" by your bank? There are ways you can reduce your bank fees, as described in this tip.

Discover More

Should You Refinance?

The rightness or wrongness of refinancing depends a lot on your specific situation. Here are two factors you can use to ...

Discover More

Buying Savings Bonds

A safe investment can be a comfort in a turbulent economy. This tip goes over the why and how of buying the ultimate 'safe ...

Discover More
More Money Tips

Realistic Budget Categories

Let's see, I think I'll put a little money in the Ferrari fund . . . some for a trip to Maui . . . what am I forgetting? Oh ...

Discover More

Creating a Budget

Does your money slip away before you know it? Follow these easy steps to find out where it's going and keep it close.

Discover More

Making Your Budget Work

A non-functioning budget is about as useful as a pre-eaten meal. If you are going to have a budget, make it a working one.

Discover More
Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 8Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 5 + 0?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)