Preparing a budget for yourself and your family is a crucial step for ensuring your financial security. But how do you prepare for the unexpected? How do you know the unknowable, those surprises that throw your carefully planned budget for a loop?

There’s plenty of advice online about how to plan for unexpected expenses, but each article seems to have a different idea of what constitutes “unexpected.” For our purposes, we’ll be considering a budget as a single unit with three sections: regular monthly expenses, irregular annual expenses, and an emergency fund.

Regular, Irregular and Emergency Expenses

Regular monthly expenses include the bills you expect every month, like rent, mortgage, insurance, utilities, and car payments. Regular monthly expenses also include the categories you budget for like groceries, eating out, entertainment and clothing.

Irregular annual expenses may occur every few months, a few times a year, or annually. They’re often referred to as “unexpected,” which can be confusing because they’re expenses that come up every year. Holidays and the expenses that accompany them (like travel, gifts, special meals, parties, etc.) occur like clockwork every year, as do birthdays, vehicle registration fees, and back-to-school shopping. Recognizing and planning for these irregular annual expenses can mean the difference between a budget that works for your family or one that leaves you short and scrambling for cash.

Emergency expenses are just that – emergencies. They are unforeseen, unavoidable, large expenses that come from situations like losing a job, sustaining a major injury or illness, or having to make a major home repair, like replacing a roof. The general rule of thumb is that an emergency fund should have three to six months’ worth of living expenses.

Research Your Expenses

To create any type of budget, you need to start by researching your expenses. To do this you’ll need:

  1. Bank and/or credit card statements, check book registers, monthly bills, calendars, etc.
  2. Computer spreadsheet or grid paper and a calculator
  3. Time
  4. Patience

Create Your Expense Grid

Across the top, put a month at the top of each column, with a column marked for totals at the end.

Down the left side, enter a category in each row for your known monthly expenses like rent/mortgage, electricity, gas, cell phone, insurance, clothing, groceries, entertainment, and gas. Leave space for items you may have forgotten.

After your known monthly expenses, enter categories for irregular annual expenses like holidays, birthdays, school supplies, uniforms, vehicle registration, property taxes, and snow removal.

Enter Your Expenses

This is the time-consuming part, but it’s also where your hard work will payoff. The more research and effort you put into this step, the more accurate and reliable your budget will be. How you approach it will be up to you. For some people, it works best to enter all their regular monthly expenses first, and then go back and take a closer look for the irregular items.

Your calendar can also be an excellent resource when trying to pin down irregular annual items. Go back over your year’s events to see which ones are reoccurring and have associated expenses that you haven’t already entered in your spreadsheet.

TIP: If you can export your online bank and/or credit card statements into a separate spreadsheet and sort them by recipient and date, it will make this step much easier.

Allocate and Separate

Once you’ve entered in all your regular and irregular expenses, determine the subtotal for each and divide by 12. The result will be the monthly budget for each. For instance, if your total regular expenses for the year was $36,00, divided it by 12 for a monthly regular budget of $3,000. If your irregular annual expenses for the year totaled $4,000, your monthly irregular budget would be roughly $333 ($4,000/12=$333.33).

Ideally, the money allocated for your irregular annual expenses would be kept in a separate account, and a set amount would be automatically transferred to this account with each paycheck. Any unused amount at the end of each month could either be left to rollover to the next month or moved to a separate emergency fund.

Emergency Fund

Any amount remaining after your regular and irregular expenses have been met in your budget should be set aside for an emergency fund. Again, ideally this should be a separate account to make it less likely you’ll dip into it for non-emergencies. If possible, set up automatic deposits into this account and reassess your budget on a regular basis to see if your budget can handle progressively larger contributions until you’ve hit a goal of three to six months’ worth of living expenses.

What if There’s Not Enough Money in My Emergency Fund?

If you have an expense that your irregular and/or emergency expense accounts aren’t ready for, there are some options you can investigate before taking more aggressive actions like tapping into your retirement or life insurance accounts. These options also apply if you want to be more aggressive about getting your emergency fund ready as quickly as possible.

  1. Reassess your budget: Are there areas you can squeeze? Entertainment, meals out and clothing are typically the easiest categories to pull from in a budget. Researching other providers may cut costs on bills like auto insurance, cable and cell phone bills. If travel for work is a big part of your budget, public transportation or ride sharing might bring some needed relief.
  2. Supplemental Income: Supplemental income can come from seasonal employment, freelance work, part-time positions, and selling unused items. If you have a standard 9-5 job, consider taking on weekend employment or picking up a few nights a week in the hospitality industry. Depending on your skillset, freelance work can be found on sites like, or If you have reliable transportation, Uber and Lyft are options for additional income.

    If you have old cell phones, tablets, video games, or any other unwanted items taking up space in your home, list them on sites like Craigslist, eBay and OfferUp. You’ll be putting one less item in a landfill, getting extra cash, and clearing clutter from life.

Creating a budget for yourself and your family is not an easy task. Sticking to it, reevaluating it, and tweaking it when necessary are even harder. But remember this – your financial security is worth the work.