Over predicting your budgeted expenses to save money

by alex on June 17, 2010

As the title says, if you over predict your expenses you will automatically begin saving money – without even noticing it!

This is a strategy I have used for years when creating a budget.

Our budget spreadsheet will ask you for your income, your predicted expenses and your actual expenses. If you over predict how much your expenses are going to be, you will need a great surplus of cash to save for each of the expenses.

Once you pay for the actual expenses, you will have a left over sum of money in your account. Grab that money and make sure it gets moved into your high interest savings account.

Although simple, this method of over predicting your expenses will rapidly help you save money. Perhaps set a rule for yourself, always predict your expenses with a 10-15% buffer on top and that means that what ever your yearly expenses are – you will have 10% of that saved up for your rainy day budget fund!

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