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.
+ $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!