Tracking utility expenses? Why bother?

I track every category and decide on an amount to save for each category every month. You might think it doesn’t make sense to “save” for a category like utilities (gas, electric, water, etc). It just is what it is, right? Sure it goes up and down over the months, but it’s not like I’m “saving up” to pay my electric bill, right?

Actually, it makes a lot of sense, for two reasons.

One, utility bills go up and down throughout the year with the seasons and other lifestyle changes. What happens if there is a very cold January or very hot July and your utility bill goes through the roof? You have to find the money somewhere. A better way is to track your expenses and calculate your total annual cost for each utility and divide by 12. Then budget this amount to “save” each month. Some months you will underspend that amount and save the rest, other months you will overspend and have the money available in the savings bucket to pay for it.

A second reason is for financial self-accountability. It is very healthy financially to look at the amount you are spending on everything, each month, so you can ask yourself “is this really how I want to spend my limited resources”. The answer might be “yes”, or it might be “maybe not, are there other options?”. Utilities are a good example. You might just accept that you spend, for example, $2,652 per year on electricity, the average in my state. Or you might ask yourself “maybe I can cut that down, and put more in my vacation fund instead”. How? Maybe install and use programmable thermostats, be more disciplined about thermostat settings when you are away from home, switch to a demand response or other cost-savings rate plan, invest in a heat pump, etc. There may be lots of options. You may choose not to do any of them, but at least you have asked yourself the questions, explored the options, and been honest with yourself about your choices and tradeoffs.

If you ignore categories like Utilites in your savings and budgeting plan, your may be in denial about choices and tradeoffs you are making.

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