How to Plan for Extra Expenses

There is no typical month when it comes to spending, so it’s easy to blow your budget when someone’s birthday pops up or you have to pay your car insurance bill. Plan for the extra expenses that come up each month, and save yourself the headache of having to rework your budget every month.

Do unexpected expenses bust your budget each month? Click through to find out how to plan for the extra expenses and get your monthly budget in order. personal finance tips | budgeting | savings

Your Emergency Fund is for Emergencies Only

You probably know that you need an emergency fund to cover three to six months of expenses if you lost your job or to cover a true emergency.  If your car breaks down (I’m not talking about routine maintenance), your emergency fund could cover it.  If your cat needs surgery, your emergency fund could cover it.

Wanting to go to the city for your friend’s birthday party is not an emergency.

Putting snow tires on your car is not an emergency.

If you continue to use money from your emergency fund to save you every time you go over your monthly budget, you won’t have the money in it when you have an actual emergency.

A Little Planning Goes a Long Way

We all know that extra expenses pop up every month, so why not plan for them?  You could easily set up extra savings accounts and contribute a small amount each month, so you have the money when one of those budget busting extras appears.

Step 1: Identify your extra expenses.

Look back over your credit card statements and highlight or note the extra expenses each month.  Things like gifts for holidays and birthdays and car maintenance should immediately stand out.  These expenses may not occur every month, so look for what you spent over the whole year.

Step 2: Figure out how much to save each month to cover these expenses.

Once you’ve identified your extra expenses, you can group these expenses into categories. For example, I would look at what I spent on baby showers, wedding gifts, and birthday gifts last year, and group them together.  Divide this amount by 12 to find out how much you need to save each month.

If you spent $800 on gifts last year, you would need to save $67 each month (800 / 12).

(We actually spent way more than this last year because we had FIVE weddings to go to last summer, and three baby showers six months later. Funny how that works.)

Step 3: Set up a savings account for each category.

Set up a designated savings account for gifts, and contribute to it each month.  Withdraw the money when you need it.  If you find that you get a lot of invitations, and it’s looking like you’ll be spending more this year, increase the amount you contribute each month.

Do the same thing for Christmas/holiday spending (I like to keep that separate), car maintenance, and any other extra expenses that you identified in step 1.

Set up a personal escrow account to set aside money for things like car insurance, life insurance, gas, tolls, and car maintenance.

Savings On Autopilot

Once you get your system in place to cover extra expenses, you’ll be able to breathe easier knowing you can handle those extra things that pop up each month.

After a few months of making manual transfers into your specific savings accounts, you could take it one step further by setting up automatic transfers on payday.  This strategy is also particularly helpful for people who lack the self-discipline to make the transfers themselves.

Personally, I still like to make the transfers myself because I’m a little bit of a control freak with my money.  You just need to find what works for you.

The Power of Saying No

Remember, if money is really tight, you can always decline an invitation.  Do not feel obligated to go to every wedding you get invited to, or to go out to dinner for every friend’s birthday.  Once you decline and invitation, and you see how understanding most people are, it makes it easier to make that decision in the future.

When we lived out west, Mr. Farmhouse Finance and I had to pick and choose the weddings that we would fly for.  It wasn’t always a question of who was a closer friend, but more of a question of if we could afford that trip at that particular time.  Our friends were very understanding when we said that we couldn’t afford something.  When we got married, and certain people couldn’t make it, we totally got where they were coming from.

Don’t be afraid to say no.  If it’s a question of whether or not you can afford something, it’s better to save the money than to be struggling to make ends meet just to go to something.

Family obligations are different, though, so make sure you budget and plan for those events.

Do unexpected expenses bust your budget each month? Click through to find out how to plan for the extra expenses and get your monthly budget in order. personal finance tips | budgeting | savings

Illusion of Scarcity Worksheet (PDF)

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Download this free worksheet and start paying yourself first.


  • Budget for financial obligations and recurring expenses
  • Prioritize your financial goals
  • Make all your transfers on payday
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