Are Your Budget Assumptions Throwing Off Your Family Finances?

by Hank Coleman

How to set up your first budgetHow accurate is your family’s monthly budget? Do you have false budget assumptions in your family’s monthly budget? Do you guess at certain things that you put in it? You’re not alone. A lot of people do not have the right math in their family’s monthly budget.

You need a budget, but you also need an accurate budget. Budgets are built on both facts and assumptions. You know exactly how much money your home mortgage will cost you. You know how much your car payment or credit card minimum balance payments are at the end of each month. But, there are many things in your budgets that you don’t know exactly how much they will cost you and your family. It is these assumptions that will eat at your budgets and could possibly throw them off.

Why Your Math Budget Might Be Off

There are two types of costs in our lives, just like the costs of a business. You have both fixed costs and variable costs. Your car loan payment, mortgage payment, and the like are all fixed costs. They are the same amount of money every month, and you can accurately predict them from month to month with almost perfect certainty.

Then, there are the variable costs of living. These include things like your water bill, your electricity costs, and other discretionary spending. Discretionary spending accounts for many of these variable costs, and they have some of the biggest impacts in our budget. They are, more likely than not, to be the areas that throw our family’s monthly budget out of whack. Here are a few monthly budget assumptions where our families are most likely not hitting the mark with their forecasts.

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Potentially Wrong Family Budget Assumptions

Gas Prices: If you have a set amount of money earmarked for your gas purchases, this category in your budget has one of the highest likelihoods of being blown out of the water. Most people set a figure that is too low for their family’s gas usage.

Gifts You Give: Do you account for all of the gifts that you give throughout the year in your family’s monthly budget? You might have a number listed in your budget as one of your budget assumptions, but it may not be more than a swag.

How much do you give in gifts for birthdays, Christmas, or other holiday gifts? If you add up the number from last year, you can simply divide by 12 and save that amount each month, setting it aside in your budget, in a savings account. I like to nickname my savings accounts listing what it will be used for.

Going Out To Eat: If you are not watching this category in your budget like a hawk, you can be greatly surprised by how much money you spend going out to eat each month. The same can be said for going to the movies and other entertainment expenses. Do you increase your budget assumptions when you expect family to come into town? This can quickly be a budget buster.

House and Car Maintenance: Do you have car maintenance or home maintenance allocated in your family’s budget? It is estimated that over the course of a year, most car owners will spend approximately $1,200 on car maintenance costs. Do you have $100 earmarked in your budget for this expense? If you do not, it will pose quite an issue if and when an issue strikes. It could drive you to reach for your credit cards or to dip into your emergency fund if you are not careful.

Cash You Spend: Cash is one of the hardest things to track. That is why my wife and I limit how much money we spend in cash every month. We actually use our American Express charge card which has to be paid off every month to budget what would typically be our cash spending. And, we even earn rewards points for the purchases as well.

What do you do with your cash? Does it burn a hole in your pocket? Can you remember where it all went? Cash is hard to track, but it is incredibly important to keep up with your cash purchases. They have the potential to mess up your well thought out family budget.

How To Account For The Unaccountable

One way to account for the items that fluctuate in your budget is to look at the past year’s worth of data. How much did you spend every month on gasoline for your car or family’s cars? You can either take the average amount of your monthly spending for that year and make that your monthly budget amount for that category this year. Or, you can take the month where you spent the most on gas as a family and make that your monthly goal for each month of this year. The last option is the most conservative with the least amount of likelihood that you will go over your budgeted amount. Using the highest monthly amount from the previous year is one way to ensure that your budget assumptions are as conservative as possible.

Or, you can take the month where you spent the most on gas as a family and make that your monthly goal for each month of this year. The last option is the most conservative with the least amount of likelihood that you will go over your budgeted amount. Using the highest monthly amount from the previous year is one way to ensure that your budget assumptions are as conservative as possible.

You need a budget. We’ve all come to grips with that reality for the most part. But, more importantly, you need an accurate budget. Budgets are built on both facts and assumptions. But, how accurate are your budget assumptions? In many cases, families are not being honest with themselves about how they are creating their budget. They are not sure what they are spending month to month on their budget.

Have you ever seen your budget get out of whack with inaccurate budget assumptions? How do you account for items in your family’s budget that vary every month?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]

Hank Coleman has written 581 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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{ 8 comments… read them below or add one }


I would handle the “unaccountable” in miscellaneous. For example, gas is something that goes up and down. I would use an average and leave a extra amount in miscellaneous for increases. Some people call it reserves for the “unaccountable”. Another way to handle it is to reduce the expenses by carpooling, bicycling or some other way. Any savings should be reserved for the other “unaccountable” expenses. Eventually, it can be put nto savings.


Christine @ ThePursuitofGreen

These are good words of advice to looking into our discretionary spending! I’ve been using budgets for myself for a bit, but its only been 2 months since my husband and i combined our finances and are using it for both of our expenses! It’s definitely a work in progress at this poin and we’re trying to figure out those issues that you have pointed out.


I always over estimate our bills so that we aren’t left financially short. If you have never actually had software that tracks all expenses and are shown up front and personal what it costs to do “short” trips to the store. You will be shocked how much it can be. We were spending an amazing amount of money because of not properly budgeting and shopping for food.


Free Money Minute

It is difficult to make a budget after just one attempt. You really need to go back at it month after month adjusting it until it starts to represent reality. Definitely not an easy thing but an important one.


Felix Lee

Setting up a monthly budget is really not for me. I always go beyond or have the wrong calculation. My partner is the one doing this task for me.



Well, a great insight to budget assumptions. This is a very common story in every household as there are too many unexpected expenses coming up, be it in terms of gifts, celebrations, health issues, etc. However, one should have kept aside a certain portion of their total monthly earnings as miscellaneous, which can be dug upon during times of emergencies. This will not hamper family finances. I’ve found this way pretty easy on our monthly expenditure.


KC @ genxfinance

It’s difficult to get the budget accurately. Just like the rest, what we just do is to overestimate a little, set aside more than enough budget for the family and household expenses.



My husband and I are really working hard to try to get out of debt and to get a good cushion of money put together, using advice outlined in Usiere Uko’s latest book titled, “Practical Steps to Financial Freedom and Independence: Your Road Map to Exiting the Rat Race and Living Your Dreams.” This book does not just tell you how, but moves you towards action, we are very dedicated to achieving this goal. However, we have found that coming up with a budget, and sticking to it is not as easy as it seems, but will continue to try to make it work.


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