7 things you never budget for (but need to)
By Erica Sandberg | March 29, 2016
Developing a budget is easy. List your expenses, subtract the total from your income and you’re ready for anything. Yet somehow something extra always seems to come up, leaving you short and often with no alternative but to pull out your credit card and charge it.
A paltry 32 percent of Americans prepare a detailed financial plan, according to 2013 Gallup Poll. So while you may include the cost of food, fuel and housing, these basics usually just graze the tip of a budgetary iceberg.
Get ready for the following most common expenses that hit just about every household. They’ll emerge sooner (and sometimes more regularly) than you think.
1. Summer camp:Have school-age children? The days of chasing fireflies into the night with the neighborhood tots have gone the way of June Cleaver.
Summer camps are now de rigueur and they’re not cheap. According to Tom Holland, CEO of the American Camp Association, resident (sleep-away) camp tuition begins at nearly $700 per week while day camps average $300 a week, and can escalate dramatically for specialty camps, such as those for sports, music and academics.
If your children haven't been campers yet, these prices may shock you, but if you've paid them before, you can’t claim ignorance. “In reality, surprise expenses are rarely surprises,” says Ericka Young, founder of Tailor-Made Budgets in Indianapolis. Long before June, review options, determine the number of weeks you’ll need to cover, then start to sock away cash.
2. Orthodontia. A mouthful of beautifully aligned teeth can be a costly unbudgeted item. The out-of-pocket price for traditional metal braces is about $5,000, though it may drop to a slightly better but still substantial $3,500 or so if you’re insured.
To avoid sticker shock, get estimates early, urges Bill Hawk, a San Diego father who laid down the all-too-common $5,000 for his son’s braces. He paid $500 upfront and spread the remaining interest-free $4,500 over three years, using his provider's installment plan. Not too painful, says Hawk, but only because he researched what was coming, then made sure he could handle the monthly bills.
Another tip from Mary Monroy, a Portland, Oregon-based budget and debt counselor for ClearPoint Credit Counseling agency, is to adequately fund your health savings account (if one is available to you) to pay with pretax dollars. According to HSAcenter.com, if you're the head of a household with one dependent and earn $80,000 a year, you might scrape $1,250 off of your taxable income for a $417 monthly (or about $5,000 annual) contribution!
3. Veterinary costs. Are you among the 54.4 million U.S. households with a dog or the 42.9 million with cats? These are the 2015 findings from the American Pet Products Association. Huge numbers, but as the survey also found, veterinary bills can cost you more than you have may have sitting in savings. In 2015, the average dog owner spent $786 on the combination of surgery and routine veterinarian expenses, while cat owners spent $594.
Yet many pet owners, like Laura Clifford of Lafayette, California, have faced far more extreme bills. Clifford has two cats, one of which was diagnosed with cancer and needed a lifesaving operation. In 2015, she shelled out more than $4,000 for vet care. “People need to start thinking about what their pets cost like they would a kid,” says Clifford. “It’s going to be a ton of money.”
In fact, planning begins prior to adoption. Before bringing an animal home, ask yourself if you’re truly willing to part with thousands in potential medical procedures. If so, consider purchasing pet insurance and then adding the premiums to your budget. Or create and fund your own pet health savings account. Clifford says $50 per month works for her, but anything you can set aside will help offset the wallop.
4. Elderly parent care. Saving for a cool new Tesla or some other big-ticket toy? As your parents age and if cash is tight for all concerned, you may want to reprioritize. A good nursing home can easily run $75,000 annually, says Dennis Breier, president of Fairwater Wealth Management in Downers Grove, Illinois. Waiting to save for it can seriously impact your essential living expenses later. In the event that you do have to help out financially for a loved one’s full-time care, you may not have enough left over to meet your own.
“People do not often budget for this because they do not talk to their aging parents about money,” says Breier. “When the need for long-term care or home health care arises, it can be a surprise that the parents cannot afford it.” If you’re in your 50s, this is the time to discuss these issues with your parents and develop a plan, which may include building future care expenses into your budget.
5. Car repairs. One of most common budget busters concerns vehicles. “The average cost of a car repair is more than $350, and those with average-age cars (11.5-years old) get them repaired multiple times per year,” says Valentine Oldham, spokeswoman for the auto repair connection company OpenBay. That means an older model might easily put you back $1,000 every 12 months.
Without that kind of cash in your savings or checking account, you’re almost certain to charge it, since not having wheels is not optional for most. Transportation is a basic need, as budget worksheets (like the one developed by American Consumer Credit Counseling) indicate, and must be factored in as a necessary monthly expense.
Want a simple system? Estimate what you might spend in a year, divide that number by 12 and drop that sum into an envelope marked “car,” says Monroy, or open a separate cash account at your bank and have your employer divvy up your paycheck so that a designated amount is automatically deposited every payday.
6. Gifts. “The item that always gets me are gifts,” says Jennifer Bright Reich, a mother from Allentown, Pennsylvania. As co-founder of The Mommy MD Guides, she’s understands how medical costs can upend a budget, but “With two kids, there are so many unexpected birthday parties to buy for.” Typical presents for children can cost between $10 and $20 a pop. Adding in gifts for assorted relatives and friends is a major economic endeavor.
Then come winter holidays. The National Retail Federation reports the average person spends $800 or so on holiday gifts. Reich, though, was prepared this year. Her budget was $850. “By careful saving, I had the money ahead of time and by careful spending I spent within a few dollars of that!” she says. She divided the amount she was willing to part with by 12, and had that figure transferred from her checking account to a separate gifts savings account. Even better, Reich found out that if the automatic deposit was at least $25, the bank account fee of $14 per month was waived.
Odds are you can guesstimate what you spent on gifts (and holiday accessories and food) last December. If you're fine with that sum, divide it by the remaining months in the year. Open up a special savings account and start to fund it. For the remaining holidays, Young suggests marking those events in advance on a wall calendar, with a proposed gift and figure, then adjust your budget. For example, a $30 heart-shaped box of chocolates may appear on Valentine's Day, $75 for flowers Mother's Day, and so on.
7. Death. Building loved ones’ end-of-life costs into a budget is not a pleasant exercise. However, it's wise to at least consider the breadth of expenses that come with the death of a loved one. A typical funeral costs around $7,000 (with a viewing and burial), according to numbers from the National Funeral Directors Association, and if it's not paid from the estate or life insurance, you may be end up footing at least some, or all, of the bill.
Don’t forget incidentals, such as obituaries. “You can easily spend $500, up to thousands, simply to let people know someone has passed away,” says Fran Solomon, president of the Los Angeles nonprofit organization HealGrief.org, dedicated to managing grief and minimizing costs during death. The briefest obituary with no photo in a small paper can cost around $200 and upward of $1,000 for a longer notification in a larger publication, says Solomon.
“Death-related expenses are definitely not typically planned for, but they should be,” says Solomon. “Have the conversation with family members. There are so many costs associated with death! If you don’t plan, the burden can be overwhelming.”
Of course, trying to project and budget for every periodic or upcoming expense at once can be unrealistic. The best advice is to start an emergency fund that you continually keep topped off. Will you make mistakes and miss accounting for a few unplanned expenses here and there? Probably, but don’t kick yourself when you do. “Budgeting is not a natural behavior," says Young. “You have to practice and practice.”