How We Budget for Power and Water

Power and Water Budget
Nearly every household has monthly power and water bills. These are priority bills because if they’re not paid, you don’t have water or electricity!

For the first several years of our marriage, we budgeted monthly for these two bills.

During most of the year, our power and water bills were a little below the monthly budgeted amount and whatever excess was left in that category we’d use to cover any areas where we went over budget or just spend the excess.

Some months, like the middle of winter and the middle of summer, the power bill would be greater than the amount we had budgeted. When the bill was more than we had budgeted, we’d have to scramble, moving money around from other budget categories and occasionally dipping into savings to cover the deficit.

After years of this, it finally dawned on us that by saving the monthly excess during months that our bills were low, we wouldn’t have any stress when we received bills that were higher than what we budget.

We started putting our power and water budget money together and at the end of each month, whatever amount was left rolled over into the next months category. After several months of setting aside the excess, we had a nice sum built up which started to serve as a cushion for the months when the bill is greater than the amount we budget.

Currently, we keep $200 in the power/water category and budget $150 each month. At the beginning of the month, our power/water budget category has $350.

After our power and water bills are paid, whatever is left over $200 is used towards extra principal and we end the month with a $200 balance. If we have to dip into that $200 cushion, we just allow the next couple of months excess build back up until we get back to that $200 excess.


$200 balance
+ $150 monthly budget amount
$350 in power/water budget at the beginning of the month

$25 water bill
– $115 electric bill

$210* left after bills are paid

*$10 would go towards an extra principal payment and $200 would remain in the power/water category for the next month.

Carrying an excess in your power/water budget category serves as a mini emergency fund that keeps high bills from causing financial stress.

And, being intentional about wisely using the excess over your minimum amount can help you reach financial goals. You can use any excess towards paying down debt, putting money in your savings account, building up an emergency fund, saving for Christmas, paying extra on your mortgage or whatever goals you’re working towards. (Our big financial goal is to pay off our mortgage in 5 years so our excess in this category goes towards our mortgage principal!)

We have decided to keep a balance of $200 excess because that’s the amount we’re comfortable with but you can choose to keep a minimum balance of $100 or even $50 and probably have a decent amount of cushion built in!


Power & Water Budget

responses to “How We Budget for Power and Water” 11

  1. I love that you do your budget with pen and paper!
    I tend to try to over-complicate things with spreadsheets, but this is a great way to have a cushion as well as pay off your mortgage (AND be able to track what your expenses were at ANY time). You two are killing it! Keep up the great work!

  2. I also have a flat rate for our electric and love when I am under! Though I forget that people have to pay for water 🙁 We live in the country so we have a well and also heat our house with a wood stove (we live in Wisconsin so it gets COLD!). I have been line drying most of my clothes now that it is summer and that saved $30 on our electric bill. I plan to put some hooks up in our living room to continue line drying in the winter – the wood stove really helps them dry fast and the clothes add more moisture in the air, which the woodstove takes away. It is always fun to see how I can lower our electric bill!

    1. How wonderful that you have a well and wood heat! And, we still haven't put up a clothesline here…we need too, I know we'll save money and I love hanging clothes on the line!

  3. I think a lot of people do forget that their bills will be higher in winter and don't budget accordingly so this is good advice.

    People should also investigate ways to cut their energy use to bring those bills down. I am in the UK and energy/water companies here are really good at supplying you with free gadgets to cut down your bills. They can range from smart meters to little devices to put in your shower head to cut water use.

    1. I would really do some research before putting a smart meter on your house. The effect of Electromagnetic Radiation are real- cell phones, wifi, ect… all add up and affect the health of everyone especially babies. Solar Panels which are also marketed as a safe way to save energy give off EMR.

      Two months ago we had our smart meter removed. I am still wondering if that is part of the reason our electric bill went down $30, or if the dryer really uses that much energy!

      Most people will not do this but you can easily heat your home, cook, bake and heat water using wood. If you do not like the wood stove in your home you can use a boiler outside – it will still heat your water and home! You are not only saving energy but your health by not exposing yourself to radiation. For a small pass ($20), you can take all the free down trees from local state parks (though we live by Amish so we purchase from them – $150 a year for everything).

  4. Another possible option is to have your bill annualized. I called both my electric and water company. They have options where you can pay the same amount each month for electric and water. For example, even if your actual electric bill is $94 one month, you will still be charged $120, but on the bright side, when your bill is $180 in a winter month, you're still charged that same $120. It kinda makes it more of a fixed cost versus a variable cost and you know the exact amount you have to budget monthly.

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