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Calculate Your Annual "Flex Spending"

Updated: Mar 30, 2022

You've probably tried to budget before, and failed, right? Maybe this is why:

Most people make ONE budget for the month and apply it to every single month of the year. When making that budget, they think through all of the expenses and things that come up in a normal month. This is the problem! There is no such thing as a "normal month" - there are month's with vacations, with car maintenance, with holiday travel and gifts, etc, there is almost always something "non normal" about each month.

When budgeting, make sure to include a line in your monthly budget for FLEX SPENDING: what we like to call the monthly average cost of alllllll the "non-monthly things" you spend money on each year. Annual certification renewals. Summer camps. Gifts.

Here's some ideas on how to figure out what your flex spending number is:

  1. Write out each month (Jan, Feb, March, etc) and next to the month, dig through your data and transaction records and figure out all of the things that hit on those months. How much do you ACTUALLY spend in December on holiday gifts and travel? What about summer activities for the kids? Take it month by month.

  2. Consider the non monthly bills, subscriptions, and renewals. When do those happen?

  3. Look at your spending on semi-fixed but semi-variable items, like gas or utilities, over the last year. For example, see how much you paid in TOTAL last year for gas and electric, Repeat.

  4. If you use a service like Mint, go through all your transactions from the past year sorted by dollar amount (largest to smallest) - this should pick up some of those large, irregular payments.

Once you've totaled up everything that goes into the flex spending pool, divide that number by 12. This is the amount of "flex spending" money you should add into your regular monthly budget - you may not use it all each month - the idea is to let it pool up so you have the larger chunks ready and waiting when they are needed.

Little tip: for a couple categories, like travel, or holidays, if you want, you can open separate savings accounts or buckets for that money and move a certain amount in monthly to keep it separate from your regular living expenses account. Then you don't have to do any mental math on how much money you have left to spend on Christmas. :) No need to break it out into categories like this for things that fall into the flex spending general category but that you aren't tempted to / inclined to overspend on.

How to fit flex spending into your budget and financial plan? Use the code 'GOANDDO' for 10% off our Financial Planning Digital Course | Find it HERE

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