Now that the New Year festivities and expenditures are behind us, it is time to get down to business.
Budgeting for the year should have already begun. But sometimes there are several new surprises that could rattle your budget. Costs that rise on annual basis add the pain of inflation. And if you’re not aware of these costs, you could easily find yourself falling behind and unable to achieve your financial goals this year.
No reason to panic — just yet. It is still early in the year to review your budget and accommodate any foreseen costs. Here is what you need to do.
It is not uncommon for utilities, phone or internet costs to increase. Check out to see how much you’ll be paying this year. In addition, check for any expired offers — that is when you get a special introductory rate that expires at a certain date or year.
Similarly, check any renewal on your ongoing contracts. For example, are your insurance rates increasing? This could be because of a claim or an increase in the value of what’s insure — like your home.
Many of these offers and rates are not uniform among providers. If the increases are significant and there is no penalty to switch, shop around. A new insurance company will be happy to gain you as a customer, or you might a better deal on your home internet or television package.
Anticipate major costs
Are you planning to move houses this year? Is a baby on the way? Do you have a family reunion or any other event that could be costly to arrange? Just like you will need to plan these big events in advance, you also must budget for them.
Knowing how much you will need and how you will pay for each and every event will help you adjust accordingly. And while you may have to lean on your credit cards to pay for some of the costs, it is always advisable not to have this as your entire strategy.
Having part of the costs available in cash, the planning to pay off the rest of the costs over a set period of time is the best way to ensure this debt doesn’t remain unpaid, accumulating interest and penalties. In addition, this exercise could help space out big, costly events through the year.
Budget for emergencies
You can’t foresee everything. So when you budget, you must leave yourself a margin for unforeseen events and expenses. This margin should be directed into your savings, if not used. Unforeseen events could be a medical emergency, job loss or even something much smaller in scale but still costly like having to get a new car.
Your emergency fund should not be optional. Of course, if you’re hardly making it paycheck to paycheck, this might sound like luxury. But if you are budgeting for getaways, disposable income spending options, and the like of non-essential budget items, then prioritise your saving for emergencies.
Increase your income
Your efforts to fit higher costs and expenses on the same income may be futile. That is why if you’re anticipating major increases, you must look into options for increasing your income. Finding a new job may be the solution, or taking extra hours of overtime, if guaranteed. For some families, it might be having a non-working spouse take a job or start a small business.
With a bit of creativity and effort, you might be able to find opportunities that bring income that balances your increased spending. Being realistic, however, about the overheads of your additional efforts is an important first step to ensure that they will pay off.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Get your yearly budget ready
Plan for higher rates
Budget for major expenses
Set money aside for emergencies
Find new income sources