Common Expenses We Don’t Budget For (But Should!)

[00:00:00] Eric Brotman: This is Eric Brotman, the host of Don’t Retire… Graduate!: The podcast that teaches you how to advance into retirement rather than retreating. Welcome to office hours where we answer listeners’ questions about personal finance, retirement readiness, and more. We received a question from Ken who asked, what are some common expenses that people don’t think to budget and save for?

And Ken, that’s a, that’s a great question. And I thought it was a perfect time for that because as the holidays have passed, we’re now thinking about paying for gifts that we bought for people over the last couple of weeks. And sometimes that can create an interesting post-holiday stressful situation.

So the first thing I would say is budget for the holidays. You know, you’ve heard of Christmas clubs or vacation clubs or those kinds of things. Lots of people maintain a different bank account or, or a different savings spot in order to make sure that when the holidays come, they’re ready and it doesn’t create stress for them after the fact. The last thing you want to do is, is pay for your, your family or friends holiday presents for two years after the holiday’s over by, by using visa.

So that would be first. We also, I don’t think budget properly for healthcare expenses, particularly those healthcare expenses that come later in life. You know, I, I think it’s been said we all are as young as we’re ever going to be again right now. We’re also often as healthy as wherever we’re going to be right now, though that’s not always true. It’s common. And that means that healthcare expenses, predictably will be more expensive for us as we age. Some of that is just like a, like a car that breaks down and you need new parts. You know, as we age, we need more medical care. So budgeting for that and having a plan around that matters because it is a reasonably predictable iceberg in the sea that we journey towards financial independence into.

So I would also say vacations. We talked about holidays. Vacations are something that people look forward to, and they’re a whole lot more fun when you don’t have to stress about paying for them. When you get back.

Ultimately, if you have enough cash to pay for your trip and not just the, the flight or the hotel or what have you, but the incidentals, the meals, maybe even some shopping while you’re there. If you’ve budgeted for it so that you know where it’s coming from, it will alleviate the stress or at least some of it of coming back to your reality.

You know, when you get back from Aruba and suddenly there’s a week’s worth of mail and bills and, and family and work and all the things. We, we sometimes forget the vacation already. You come home and you need a vacation from your vacation. So being prepared financially does make that a whole lot easier. And so I would budget for that.

Another thing people don’t think about is planned obsolescence. You know, if you look at a typical budget in 2022 for a, an American family, the budget includes items that 10, 20, 30 years ago didn’t exist. I mean in the, in the nineties, even early 2000, we weren’t thinking about internet service providers. We weren’t thinking about streaming services. We weren’t thinking about the subscriptions that we have to everything. And so budgeting and making sure that as you get older and as you you save for your own retirement, your own financial independence, making sure that you have baked in a quote unquote raise to spend money on things that will be in our budgets in 2042, that don’t exist today. Things we haven’t even dreamt of. You know, I, I, you know, allow yourself to dream Isaac Asimov style. Maybe we’re we need a hovercraft fund at some point. I don’t know what it’ll be. I’m certainly not a futurist. But I do know that there will be things that exist in the future that don’t exist today and you can budget for those long-term.

To be a little bit more grounded and down to earth and immediate, budget for some of the what ifs. If you’re if you’re in a condominium and you’re part of the condominium association and you’re the treasurer, one of the things you have is this, this concept of replacement reserves.

This idea that rooves only lasts so long or driveways or stairwells or windows, or what have you. So if you’re a homeowner, having some idea of the age of your appliances, the age of your infrastructure and understanding when you might need to replace it can, can make your world a whole lot better. If you suddenly realize you’re going to need a new driveway and a new HVAC in the same year, that can be a serious problem for a lot of family. So if you’ve done your own simple replacement reserve study, when are you going to need a hot water heater? When, how old are your appliances? Same thing with cars. You know, some people like the new car smell and they get a new car every two or three years.

That’s not a great financial move, but for some people it’s a priority. It makes them happy. In most cases you want to drive your car until it’s no longer feasible to fix it. Not because it can’t be fixed, but because it’s not cost effective to do so. So if, if you have a car and you’ve paid for it, let’s say you’ve paid for it over 3, 4, 5 years, and you’re going to drive it for another few years, continue to make the car payment, but make it to a savings account.

If you do that, when it’s time to replace that car, you’re going to have most of the money sitting there. And instead of paying finance charges to a bank or a, or an automotive dealer, you’ll be paying cash for a car and you can then continue to make your quote unquote payment, but make it to yourself. So Ken, I could go on. There’s there’s so many things, but I hope this was a an interesting laundry list to begin with.

And I really appreciate your question. I’m glad you asked it and I thank you. If you’d like to send us a question, which we might answer in a future episode of office hours, post it on our Facebook page or tweet it to us at @BrotmanPlanning. If you like what you hear, please subscribe to our podcast and leave a review on apple podcasts or wherever you listen to your favorite shows.

Please also check out our books, workbooks and online financial literacy resources at Brotmanmedia.com. Thanks for coming to office hours. Be sure to tune in for new content every Thursday. For now, this is your host, Eric Brotman, reminding you: don’t retire. Graduate.