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Earlier this year, my wife and I decided that we needed a budget. Many years ago, before we had 3 children, we followed a monthly budget. We tracked our spending and made sure to keep it at or just under the amount of combined income that we were bringing in.
At the time, this budget worked well for our family. But as our family grew, we moved to another state, had children, transitioned to a single income – our original budget became worthless.
As the years have passed, we stopped following any sort of budget and relied on common sense to get by. We never splurge or go out to eat that often. I drive a 13+ year old vehicle that has been paid off for many years. We have stayed out of debt – not because we followed a budget – but rather because we used common sense to manage our finances.
The time now has come again to put together a new family budget that takes into account all of our life status changes. Our bigger home. 3 Children. A single income, etc.
We are not interested in putting together a new budget to stay out of debt. Instead, we want to squeeze every last penny out of our personal finances so we can continue to build our passive income stream.
While there are certain things we don’t want to completely give up, we want to maximize our income as much as possible. A new budget should help.
Over the next several weeks, we are using Personal Capital to track our monthly spending and build out a new budget. We have already reviewed our mortgage related expenses and our water and sewer expenses.
Today, we are reviewing another group of utility expenses that we need to pay for by owning a home – Electricity (Power) and Gas (Heat).
Electricity and Gas Spending
Based on the home we live in, we pay a monthly electric bill to power our home. This covers things like running our dryer, stove, microwave, and lights. During the summer months, this bill is much higher as we are using electricity to cool our home through A/C units. We also have a in-ground pool that uses electricity to run the pump.
In addition to paying an electric bill, we also have a monthly gas bill to help heat our home. Our neighborhood has a natural gas provider that is used to keep our house heated (mostly in the winter) and for a few other things like our hot water heater. Unlike our electric bill, our natural gas expenses are considerably higher during the winter months than the summer months.
Both our electric and gas bills are paid to different utility companies. However, I like to track these together in regards to our monthly budget. Each bill tends to offset the other for the most part as one is much higher in the summer while the other hits its peak during the winter.
Therefore, in terms of our monthly budget, we plan to combine these expenses together to even out our spending as much as possible.
To get a good idea of how our monthly electric bill fluctuates, here our the payments we have made over the last 12 months.
- June – $137.12
- May – $109.03
- April – $104.79
- March – $118.98
- February – $109.76
- January – $129.05
- December – $97.62
- November – $111.18
- October – $117.72
- September – $163.98
- August – $154.54
- July – $171.55
Average per Month = $127.11
Note – There is a couple week lag between the time we are using the electricity and the time we are getting billed. Also, you can notice that the cooler winter months are generally lower than summer months.
Our gas bill to heat our home is billed separately from a different provider. There is even more variance in monthly gas bills from the winter to the summer months.
- June – $18.20
- May – $35.92
- April – $148.99
- March – $140.85
- February – $130.54
- January – $101.02
- December – $26.17
- November – $15.66
- October – $14.68
- September – $14.68
- August – $13.69
- July – $15.87
Average per Month = $56.36
Note – Looking at our spending, there are 4 main months where our gas bill is really high (January, February, March, April). Just like the electric bill, there is a big lag time between when we are heating our home and the time we are billed. These numbers represent the billing period when payments are due.
Electric & Gas Budget
Based on the variance from month to month, we have decided to combine both our electric and gas bills for our monthly budget. On average, we spend $183.47 a month on electricity and gas for our home.
Our lowest combined month (from the past year) was December – $123.79.
Our highest combined month (from the past year ) was March – $259.83.
In order to make sure we have enough money in our budget to cover our electric and gas bills each month, I want to figure high. Therefore, we will budget $250 a month. Any money that is leftover can be used to cover other areas of our budget or to invest.
Electric & Gas Monthly Budget = $250
As a home owner, I have found that utility bills like electricity and gas can be the least predictable expenses from month to month. While we know that our electricity bill is higher in the summer to run our pool pump and air conditioning units – our gas bill is higher in the winter to help heat our home.
Instead of budgeting different amounts each month of the year, I like to keep things simple and consistent. Therefore, we decided to combine these expenses into one “bucket” to pull from each month.
We decided to set a goal to keep our electric and gas spending each month combined to under $250.
Over the past 12 months, our highest combined bill for these two utilities was $259.83. Only one other month (April) did we go over $250, so I think we should be well under our budget for these utilities over the course of a year.
How do you budget for utility expenses that vary from month to month?