Let me firstly admit, I didn’t plan this post. It just came to me in a dream last night and I got up really early this morning to write it before the literary ingeniousness disappeared. Okay that’s not true either. A simple conversation with my dearly beloved sparked a few thoughts in me regarding budgets and how to manage them and I thought it was time to discuss how to deal with expenses that can change month to month. Mainly, the dreadful electricity bill.
Now there are a few ways to manage the electric bills, but the first thing I’d advise is making sure you’re shopping around for the best rate if you can. I live in Texas now, so there’s this cool thing called Power to Choose where I can literally find dozens of electric companies that will provide power to my home. Before moving, while were were still in Iowa and didn’t have a choice, this revelation of choices shocked me. I was excited to know we’d be able to make our own choice for who provided energy AND we can change it to a different company with a different rate if we find that the rate we have isn’t going to satisfy us long-term. It’s that peace of mind that I love.
The next thing, something that’s available with nearly EVERY electricity plan, is to check to see if there’s a way they can make every month the SAME. It’s normally called “budget billing” or “budget payment plans.” What they typically do is take the last year’s worth of bills and determine an average monthly energy use, and bill you every month for THAT amount. Most plans, if you use less than you’ve paid for throughout the year, will credit that to your account for the following year. They’ll typically recalculate it yearly as well. This is GREAT for your budget because then the amount NEVER changes. This is something a lot of people choose, but we still haven’t. The biggest reason we have not chosen this is because we moved into a house that hadn’t been lived in for a few months and also, there’s no way of knowing if the previous owners used more or less electricity than we did, and didn’t want to gamble on it. We’ll likely switch over to this type of plan after living here for a year.
In the meantime, without budget billing, we have this thing I’ve decided to call The Death Machine. Or what most people call a budget. What makes TDM different is that it’s a year-long proposed spending plan. That means we have a prospective budget laid out for nearly an entire year. At least twice a month we discuss what’s going on with it and make changes to it. We add fields for new expenses and remove fields for expenses we won’t have. We leave empty rows for use when we have an unexpected expense that we can cover from the checking account (vs. the Emergency Fund.) It works out well for us and we like to have, at the bottom of each month, a nice sized “leftover” amount to give us leeway to change amounts if a bill is more than expected. We also need to carry over some money into the first part of the month to keep our expenses balanced or we’d run out of money before the mid-month paycheck.
To give you a brief example of what happens when a bill is more than expected, I give you Exhibit #1 & Exhibit #2.
This is really exactly how it works, for every bill that is variable. Sometimes it’s me saying “Hey Nick, got the water bill in the mail today! Guess what! It’s $80 less than expected.” And of course there’s this time when Nick gets an email saying the bill is ready and then breaks the bad news to me
unexpectedly in the middle of my relaxing mid-day bath gently. I freak out with either great happiness or mild disappointment, enter it into the spreadsheet and carry on my merry way.
It’s really important to be flexible in your budget when your bills are flexible. It helps avoid mishaps with paying late or less than you’re supposed to. And it’s also absolutely vital that you consult your budget RIGHT AWAY when you know there will be a change. The Death Machine will mock you. But you ultimately have control over it.
How do you handle variable expenses in your budget? Do you HAVE variable expenses or is everything on a budget billing plan? Chat it up below!
*By the way, that car payment is weekly, don’t get too excited about its low numbers.