Which Monthly Expenses Should You Include In Your Budget?

• Budgeting for expenses from the start can help you cut down unnecessary spending and save for your future.
• You can bifurcate monthly expenses under two categories - fixed and variable.
• By tracking actuals against budgeted expenses, you can make timely adjustments and manage your finances better.

A monthly budget gives you financial clarity and is an important tool to manage expenses effectively. It helps you balance income and expenses while saving for future financial goals.Talking about expenses, you can broadly classify them into fixed and variable. Fixed expenses are those which largely remain the same. On the other hand, variable expenses keep changing over time. While rent is an example of a fixed cost, grocery bills are variable.In this blog, you'll learn about the different expenses that must be considered while planning your monthly budget. Also Read: 6 Simple Steps for Making Personal Budget

To help you account for the majority of the expenses in advance, we have listed the most common expenses.

• Housing - In case you live in a rented house, account for the fixed rental amount. Otherwise, list down the recurring maintenance expenses.
• Food - Make a note of all expenses towards fruits, vegetables, and groceries in your monthly budget planner.
• Utilities - Utilities help you lead a comfortable life and typically include payment towards electricity, mobile bills, internet connection, etc.
• Transport - This covers your daily commute costs like train/bus/taxi fares in the case of public transport and petrol/toll/parking charges when you drive your car.
• Childcare - Add daycare charges, education costs, hobby class fees, school trips, etc. to your monthly expenses.
• Pets - Give your furry friends a comfortable living by accounting for pet food and routine veterinary bills in your monthly expenses.
• AMCs - These include payment towards the Annual Maintenance Contract for your vehicles, aqua guard, air conditioners, refrigerator, and other white goods.
• EMIs - Be it a vehicle, home, or personal loan, make sure to include all debts and obligations in your monthly budget planner.
• Insurance - Premiums towards insurance and/or mediclaim also form a vital part of your monthly expenses. These include both, premiums paid for self and family.
• Investments - Investments towards mutual funds, PPF, RDs, and any other financial instruments help you achieve financial stability over the long term and should be included in your monthly budget planner.
• Contingencies - Medical expenses and other financial emergencies always come unannounced. Be prepared in advance by making a provision in your monthly budget planner.
• Personal Grooming - You are sure to visit a salon or shop for clothes sometime soon. Make a provision for these to avoid any last-minute financial adjustments.
• Entertainment - Who doesn’t like cafes, dinners, and movies? You can enjoy these even more by accounting for the related costs right from the start.
• Miscellaneous - It is a good idea to make provisions for costs that do not fall under standard expenses. Unexpected repair cost is an example here.

Given the limited financial means, it is crucial to prioritise expenses and develop the habit of saving. Here is where bifurcating them into ‘needs’ and ‘wants’ can be helpful.‘Need’ is something that you cannot do without. It is an expense necessary for survival. On the other hand, ‘want’ is an expense not necessarily needed for your living, and you can conveniently do without it.

• Example of Needs - Rent, electricity, groceries, travel to work, etc.
• Example of Wants - Vacationing, expensive clothes, high-end gadgets, etc.

However, wants and needs are unique. What is a need for someone may be a want for somebody else. You are the best person to judge if a particular expense falls under necessary monthly expenses or not.

Given the uncertainty of future events, it understandably gets challenging to determine the exact amount of monthly expenses. Furthermore, an underestimation or overestimation can imbalance your income and expenses.Here are a few things that can help you create a monthly budget planner as correctly as possible.

• Observe Past Spending Patterns - Your past spending patterns could give you an estimated cost that you are likely to spend. This will help you primarily with your variable monthly expenses which are difficult to predict otherwise.

• Break Your Annual Costs - Divide your annual cost by 12 to derive the monthly figure. For example, you can set aside a part of your annual insurance premium to avoid feeling financially burdened when it falls due.
• Use Thumb Rules - The 50-30-20 rule suggests using 50% of your post-tax income for needs, 30% for wants and the balance 20% for investments. However, the rule serves only as a guideline, and you can change the allocation according to your financial situation and life stage.

Using tools like Spend Track from the ABCD app can help you not just create a monthly budget but also get insights into your spending habits. You can also link your multiple bank accounts and get a holistic view of your finances.Additionally, you can explore Spend Track from the ABCD app for its effective financial management tools.

Listing down your monthly expenses against your income gives you an accurate picture of your financial position. While it may get overwhelming at the beginning, it empowers you to gain financial clarity and take corrective measures.You will also feel more confident and will be better placed to manage your finances and achieve your future goals.