Have you ever been on a vacation you thought you “budgeted” for only to return home and realize you spent way more than you anticipated? Or felt frustrated when an “unexpected” cost — like a parking ticket-cropped up and threw your spending plan off for the month?
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You aren’t alone. Personal finance guru, host of Netflix’s “How To Get Rich,” and New York Times bestselling author Ramit Sethi says he’s made similar mistakes and more which is why he encourages those following his “conscious spending plan” (also known as a budget to the rest of us) to be conservative with their cost estimates and factor in a buffer.
Here are six areas where he says you need to set aside more money in your estimation costs just in case:
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1. General Expenditures/Fixed Costs
When creating your monthly Conscious Spending Plan or budget that includes all of your expenses, give yourself a little padding, Sethi suggests in his “I Will Teach You to Be Rich” book. Tack on another 15% to your general expenditures category to account for things like car repairs, stupid mistakes, medical emergencies and unexpected expenses like traffic tickets. By putting a little more money into this area, you’ll be glad you have some savings set aside should something crop up.
2. Travel
Sethi says that when he travels he often estimates that it’ll cost him on average double what he spends on the hotel as a daily estimation of his expenses. So if he’s renting a room for $200 a night, he knows that by the time he’s done paying hotel fees and taxes, renting a car and/or paying for transportation, eating, and maybe even a spa service, he should plan for his trip to cost at least $400 a day.
He also suggested on X (formerly Twitter) that when trying to account for how much you’ll spend on a vacation, “Identify the big three (airfare, hotel, daily spend on food), then adding 15% to account for things you didn’t factor in.”
3. Timeshares
They might have been sold to you as an “investment” and a “great deal” that you’d be foolish not to take advantage of but in most cases, Sethi believes timeshares “are a scam.” The fees on timeshares –which often aren’t drilled into your mind during these presentations-include nightly fees, annual fees, and maintenance fees. Any of these fees can be raised without you having a say in it and whether or now you’ve used the timeshare, according to some sources. If you decide to try to get out of your timeshare, you might also need to pay a lawyer to do so. We’re betting that you didn’t add in a buffer for that aspect of the timeshare buying experience.