How to budget for bills that vary every month, like utilities

A bill that varies with the season is budgeted at its twelve-month average, not at last month's amount. Add up a year of the bill, divide by twelve, and set the line there, so that a $210 January and a $105 May are both covered by the same $155. Let the line carry its balance, so the cheap months build up what the expensive months spend, and compare each new bill with the same month last year rather than with the month before, which is the only comparison that says whether anything has changed. When the swing between seasons is larger than the budget can absorb, most utilities offer budget billing, which does the averaging for you.

Why last month's amount is the wrong budget

A gas bill budgeted at last month's amount is over every autumn and under every spring, and the household reads both as news. The bill did not change; the season did, and a budget line that follows the season a month behind is always wrong by one month of weather. The line reads as unreliable, and unreliable lines are the ones people stop checking.

The twelve-month average is wrong every month by design and right over the year, which is the arrangement a budget can work with. The winter months overspend the line and the summer months underspend it, and if the line carries its balance, the year nets to zero.

Set the line at the average

1. Collect twelve months of the bill, from the utility's own history if the statements are gone; most utilities show a year of bills online.
2. Add them up and divide by twelve. Round up to a figure you will remember.
3. Set the budget line there, and turn on whatever carries the line's unspent balance to the next month.
4. Seed the balance if the first month is an expensive one, with about the difference between that month's bill and the average, so the line does not start the year in the red.

A worked year, gas and electric

The year's bills come to $1,840, the budget to $1,860, and the balance ends December at $20. Started in January with no seed, the line runs $100 in the red by March, which is the reason to seed it with about $100 or to start the line in a cheap month. Either way, the household set one amount in January and did not touch it, and every month's bill was covered.

Compare with the same month last year

A December bill of $190 against a November bill of $150 says nothing except that December is colder. A December bill of $190 against last December's $165 says the bill is up 15%, and that is worth a look: a rate increase, a new appliance, a thermostat setting, or a leak. Keep the previous year's bills in the same table and read each new bill against its own month. That is the only comparison that separates weather from change, and it is also the check that catches a rate increase before it has cost a full year.

When the swing is too large: budget billing

Most gas and electric utilities offer budget billing, sometimes called a level pay or average payment plan: the utility computes the twelve-month average itself, charges that amount every month, and settles the difference once a year. It does what the table above does, with the balance held by the utility instead of by the household. It suits a household whose winter bill is several times its summer bill and whose budget cannot carry the swing; the cost is that the settlement month can bring a large catch-up if usage rose, and the monthly figure is reset each year.

The same method, budgeting at the average, covers water, trash, and any other bill with a seasonal shape, and the tracking of the previous year is what makes each of them readable.

Common mistakes

• Budgeting at last month's amount. Wrong by a month of weather, every month.
• Resetting the line each month. The summer surplus is thrown away and the winter deficit has nothing to draw on.
• Comparing with the previous month. It measures the season, not the bill.
• Starting the line in January with no seed. The line is a hundred dollars in the red by spring and reads as a failure.
• Ignoring a bill that rose against its own month last year. That is the rate increase or the leak, and it compounds.
• Choosing budget billing and then also budgeting the swing. One or the other; both is double-counting.

Common questions

How much should I budget for utilities? Your own twelve-month average, from the utility's history, rounded up. The number depends on the home, the climate, and the household, so no figure from elsewhere is a substitute. In the worked year the average is $153 and the line is $155.

Should I use budget billing from the utility? If the swing between your cheapest and most expensive months is larger than your budget can carry, yes. If your budget can carry the balance, doing the averaging yourself keeps the settlement month from surprising you and lets you see the real bills.

What if the bill is higher than the same month last year? Look for the cause before adjusting the line: a rate change on the bill itself, a new appliance or a household member, a thermostat change, or a leak. If the increase is a rate change, raise the line by the same percentage. If it is usage, the line waits until you decide whether the usage stays.

Does this work for a bill with no season, like a phone plan with overages? The same way: twelve months averaged, with the balance carried, and each month read against the plan's base rate to see what the overage was. A bill that varies with use rather than with weather is still a bill that varies, and the average is still the right line.

How do I budget a variable bill in a new home with no history? Ask the utility for the address's history, which many provide, or ask the previous occupant or the landlord for a typical high and low month. Budget at the midpoint for the first year and replace it with the real average after twelve bills.

How Zypper handles this

Zypper treats a variable bill as a recurring group whose amount is predicted from the pattern of your actual transactions, so the recurring page shows each utility's next expected payment and amount, and a bill that arrives larger than its pattern is visible the day it lands. On the budget page, the bill counts as money already spoken for in the month it is due, and its category can carry its balance with Roll over unspent budget, so the summer surplus funds the winter deficit the way the table does, with a Starting balance as the seed and the carried balance shown beside the amount. The cash flow page charts a category over any period you choose, this month, last quarter, or the year, with the transactions behind it, which is where the same-month-last-year read starts. See Recurring transactions and bill tracking, Rolling over unspent budget, and Cash flow for the details, or get started with Zypper to budget your utilities at the average.