When you don't budget for reality, 1 of 2 things will happen: you'll come up short on paying for everything you've budgeted or you'll absorb the unexpected expense in the form of debt. Neither is good (credit cards are a dangerous form of planning for emergencies).
Sure, you've accounted for rent/mortgage, utilities, car payments, insurance, gas, food and so on. But you probably didn't think about things like birthday gifts, medical expenses, car repairs, your child’s jog-a-thon at school and any of those things that seem to pop-up out of nowhere that impair your ability to stick with a budget.
1. Gifts
Gifts will sneak up on you. Especially if you have small kids. It can seem like there’s a birthday party to go to every weekend. At work, you can also get roped into the "we're all going in together to get the boss a gift." Make sure to make a line for it on your budget. Obviously, take into account the birthdays you know you have coming up and budget for them. And if there’s a month you don't know of any gift occasions, put $25-$50 away just in case. And if you don't use it by the end of the month, maybe you buy a loved one a gift just because.
2. Medical Expenses
Sure you have insurance. But do you know how much your deductible is? How about co-pays? You may not be able to put away enough in one month to cover a major medical expense but this is a great category to have that you put money towards every month. Make sure you keep written down what money belongs to what in savings.
3. Car Repairs
The car is running fine today. But in the next 12 months who knows? This is another great category to mark in your savings. Starting to put money towards this every month will put you in a much more secure situation when it happens.
4. Vacation
A lot of people of depend on just “hopefully having enough to go somewhere and do something.” And, some people depend on a bonus check or a tax return but these are not guaranteed. Putting away money every month towards a vacation gives you something to look forward to not just hope for. It can also save you money because you can go ahead and buy plane tickets earlier getting a better deal. Think about where you want to go and realistically how much it will cost. Then, break it down over 12 months and put it away.
5. Big Ticket Items
The average family or small business can’t just walk into store and completely replace all its furnishings or equipment at once. But if you're not budgeting realistically, you won't even be able to make even 1 major purchase. Sure you can get by with that old couch but what if it’s the washing machine that goes out. This is a chance to replace it and someone that’s planned for this type of expense can buy something that’s better quality and makes life easier, which will save you even more money in the long run.
6. Random Acts of Kindness (Or Societal Obligation)
You probably dread seeing your child pull out of their backpack a legal-sized envelope with a spreadsheet stapled to the front. You say, “Oh geez, what do they want money for now?” But you also may just come across someone you feel like could use a little financial boost or perhaps a charity that you'd like to make a one-time contribution to. Planning for it allows you to be open to your charitable nature without having a nagging sensation that you're taking away from something critical like the power bill. Plus, you know how much you can give when someone asks.
What else can you think of that’s gotten you off-track with your budget? If you can think of something, then plan for it.