A budget is a great way to keep track of your expenses and ensure that your costs are under control. However, often times in life you’ll run into many irregular and non-recurring costs that you simply can’t avoid. Whether it’s having to fix something that’s broken or planning for a baby, there are many things that can throw your budget out of whack.
You could say that for this reason budgets don’t work, because there are too many things that can get in the way of them. However, this is precisely why budgets are important, so that you can prepare for these events.
One important thing to do when setting up a budget is to separate out which costs you have control over, and which you don’t. The focus should be on your controllable expenses, and by doing so you’ll make it easier to be financially prepared when you’re hit with one-time costs that you can’t budget for.
However, non-recurring and unusual expenses should be treated no differently than if on a company’s financial statements. If a company continuously incurs ‘unusual’ expenses, then perhaps they should be tracked differently, and aren’t all that unusual. The same goes for an individual: if expenses you consider to be one-time expenses keep popping up, then maybe that’s a sign that they really aren’t and you should try to budget for them.
A good example is Christmas shopping. Although it doesn’t happen every month, over the course of the year you’ll likely shop for birthdays and other events, and so it might make sense to try and budget an amount for these items. Although there may be some fluctuation month-to-month, you can still set an annual target.