Over-Budgeting Can Help You Save!

   

Saving for  a rainy day is more important now than ever before.  I’ve learned that neat way to trick yourself into saving more and that is overbudgeting! Essentially if you practice over-budgeting and are extra conservative with your expenses, you can end up saving more!

Overbudgeting Based on Seasons

So when the summer began, I took our income minus the expense to see what would be left. What are the types of extra expenses that can occur in the summer? There are increased energy cost because of warmer weather, increased gas cost for your car because historically gas prices go up in the summer and people drive more due to vacations and such. Check out this chart below from Gasbuddy.com that shows prices peaking in the summer for the past 18 months:

People use more water in the summer too to hydrate wash their cars, and the lucky ones who have swimming pools.

Over-Budgeting = Unexpected Savings!

So I had a couple of weekend trips planned and took them with my family during the summer.  I over-budgeted by a few hundred dollars because I drove to these places and didn’t know how much I would drive in and around my destination during my trip. We also didn’t exactly know how much we would spend on things like food, shopping, gifts.

Following the trips, I ended up with $300 left in my pocket, score! So these funds went directly into our savings. I guess you could say this is a psychological trick that one can use for saving.

Or you can also compare it to finding loose change between your sofa cushions or finding a folded up wrinkly $20 bill in your jeans. The dangerous part is that you don’t want to over-budget so far out that it has no basis or rule of thumb. My basis for the “summer trip(s) budget” was the amount I would spend one big week or week and a half long vacation.

Unexpected Expenses Can Occur 

Budgets are useful only when the numbers behind them are reasonable and meaningful. And what is reasonable is to engage in over-budgeting and allocate for unexpected things. This is because life has a way of throwing us a curve ball (more often than not) which can be a leaky roof, an unexpected health event, or your car battery suddenly died and needs to be replaced immediately.

And in those bonus times, when a month comes and goes and you don’t incur an unexpected expense, then it results in extra-savings! And when you do this exercise and over-budget resulting in unexpected funds left over, make sure to do something wise with it….like SAVE and invest it.

Allocate Slightly More To Variable Expenses

A good starting point to overbudgeting may be to allocate 10% more into a couple of your monthly variable expenses. Those are the expenses that change slightly from month to month like gas, groceries, and not things like mortgage, cell phone which are the same month to month. So for example, if your grocery budget is $300 per month, bump it up to $320, but still try to stay within the original $300 budget.

When you stay within the original budgeted amount, you’ll feel like the extra money is a bonus (even if you went slightly over the original budgeted amount). This will propel you to work harder to stay within budget and find other ways to save like cooking at home more, couponing, and buying items in bulk.

Remember that a budget is a work in process. It can continue to be refined and adjusted to your needs. But it’s also important to meet the objectives of a budget, which is to stay disciplined in your spending and even more so,  saving.