Planning for Utility Costs in Your Monthly Budget

Unless you live in an apartment where utilities are included, you probably groan slightly every month when your utility bill arrives, and you may wonder how you can account for utilities in your monthly budget.

It’s difficult to define an “average” utility bill in the United States, because the needs of a house in Orlando are completely different from the needs of a house in Minneapolis. The size of your utility bill depends on the size of your home, how well insulated it is, how many people live there, energy rates in your region, and how careful everyone in the household is with energy usage.

A 2013 survey of utilities in US cities found that Memphis, Springfield, MO, Reno, Omaha, and Columbus, OH had the lowest average utility bills, with average monthly bills ranging from $234.40 to $293.95. But utilities are metered, so how do you plan for them in your monthly budget?

Start With Your Billing History

If you save your bill stubs, you can get an idea how much you spend in a typical month. Your utility company can provide you with a record of your utility bills if you don’t save your stubs, or you can look back over bank statements to find how much you’ve been paying. Keep an eye out for anomalies like record heat waves or cold snaps. Note the trends in your utility bills so you’ll have an idea which months make the highest demands on your utility budget. Being prepared can help you fine tune your monthly budget based on typical utility costs.

Learn if Your Local Utility Does Budget Billing

Many local utilities offer what they term “budget billing” or some variation of that term. What they do is average a couple of years’ worth of utility bills for your home and bill you the same amount each month. Before you sign up, ask if there are any administrative fees associated with the service, and also find out how shortfalls or overages are handled. Ideally, at the end of the year, you should get a credit on your bill if you’ve used less energy than budgeted (or you may have to make up a shortfall if you use more than budgeted). But not all utilities do this, so ask up front. While budget billing doesn’t give you the satisfaction of low bills during those mild spring or autumn months, it does give you predictability, helping you plan a more accurate monthly budget.

Read the Mail Your Utility Companies Send You

Electricity and gas providers generally alert customers to trends in utility prices each year. If natural gas prices increase, for example, your gas company may include this information in their periodic newsletters, or it may be covered in a local news story. And you can always call your utility and ask where rates are headed.

Be Smart With Energy Usage

Lax energy habits cost your family money, but habits can change. The next time you run out of energy-hungry incandescent light bulbs, go ahead and spring for LEDs or compact fluorescent bulbs. They last much longer and use far less energy, and today’s compact fluorescent bulbs come in more eye-friendly colors, so your home doesn’t have to be cast in a dull, unflattering light.

You can have an energy audit done by your local utility company, and it may be free of charge. These are great for pointing out hidden leaks and drafts, which can account for 25 to 30% of an average energy bill. Your home may have obviously drafty places, and you should address these with weather stripping or caulk.

Set your water heater at 120 degrees Fahrenheit rather than 140 degrees. This can save you $36 to $61 per year, and reduces the danger of scalding, particularly in households with small children. Replace your furnace or heating / AC system filters every six weeks or so to keep dust from impeding air flow into your system and to help it run more efficiently. Finally, every night before bed, do a walk-through and turn off unused lights and appliances. Over a year, the savings can really add up.

Having a monthly budget is one of the smartest ways to manage money both short term and long term. Energy costs can be tricky to budget for because they fluctuate, but you can do quite a bit to reduce utility costs, and your utility provider may offer monthly average billing so you can avoid billing surprises. Online budgeting tools are great if you are starting a monthly budget, because they help you remember all the things you have to budget for and let you track your progress. Learning to plan for utility costs is a powerful way to make monthly budgeting easier and more effective.

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