We’ve talked before about high house prices and growing inflation, but there’s another issue that may be affecting your monthly expenses: increasing utility costs. Many people across the country are experiencing higher bills as water and energy providers raise rates. Additionally, extreme temperatures often require homeowners to run the AC or furnace longer than they typically would during a season.
So what’s the solution to those high utility bills? How can you make sure they don’t have a long-lasting impact on your financial stability?
It all starts with your budget. By taking the time to truly evaluate your essential monthly expenses (like utility bills), you can understand how they affect your budget. Then, you can make any necessary adjustments to ensure that you’re ready to handle these charges in the future.
Step 1: Get Clear on Your Utility Bills
Start by actually looking at your bills — not just the “amount due” section, but all the information you can find. Your energy bill, for example, should tell you how many kilowatt-hours (kWh) your household uses each month.
You should also be able to see how much you’re paying for those kWh. Some providers charge a flat usage fee for each kWh your home uses. However, other providers charge a variable rate where the price per kWh increases based on the time of day and/or the season of the year.
If you’re on a variable plan, you may want to take steps to lower your energy usage during peak times. For example, maybe set your AC thermostat to a higher temperature (or turn the furnace down) during peak hours.
Step 2: Consider Flat-Rate Billing
Another option you may want to consider is flat-rate billing. Some electricity providers across the country offer this option. The exact terms may vary depending on your provider, but the basic idea is that you pay a flat fee for electricity each month. Your usage doesn’t affect that fee — you’ll pay the same amount no matter how much energy you use.
At first glance, this seems like a great solution. You might be able to simplify your budget a bit since you’ll know exactly how much your utility bills will be each month. And you don’t have to worry about changing your thermostat around to avoid increasing your usage during extreme weather.
However, it’s worth noting that in most cases, flat-rate billing works out to a higher rate per kWh. Additionally, not all energy providers offer this service. If yours does, make sure you understand all the terms and conditions completely before switching to this type of billing plan. There may be other billing options available outside of flat-rate options. Use a reliable website to see if there are any other choices available to you.
Step 3: Check Your HVAC and Water Equipment
Once you’ve analyzed your electricity and water bills, you can do a little more research and see if your usage is comparable to households of a similar size in your area. If you are using significantly more energy or water, it’s time to see if there’s anything going wrong with your home’s infrastructure.
For example, if your energy usage is higher than you expected, you may want to schedule a maintenance appointment for your furnace, AC, and/or water heater. If any of this equipment is malfunctioning, it can significantly raise your energy usage. Additionally, older models typically use more energy than newer ones. You may be able to save a lot on your utility bill by replacing an outdated AC unit or furnace with a modern, energy-saving model.
The same idea applies to your water bill. If you find out you’re using many more gallons of water each month than you expected, there might be an underlying problem. Maybe you have a broken sprinkler head or a small leak in one of your pipes. Even a minor drip in a faucet can add up over time. As with your HVAC equipment, upgrading your dishwasher or washing machine can reduce your water usage and lower those water bills.
Step 4: Review and Update Your Budget
Once you’ve done everything you can to ensure that your utility bills are as low and as predictable as possible, it’s time to take a deep dive into your budget. You probably know that you’ve been spending more on utility bills, but it’s crucial to know exactly how much more.
Pull your bills from the last year or two and do a comparison. How much more are you spending on your utilities now than last year? You can compare by year, by month, and by season to get a comprehensive view of exactly how much your utility bills have increased over time.
Take that information, and start analyzing your budget. Do you have extra room in your budget to handle your current bills? What about next year? Chances are your bills will continue to increase over time as seasonal weather remains unpredictable and providers continue to raise their rates. So it’s important to know exactly how much wiggle room you have in your budget.
And if you don’t have any extra room? Then it’s probably time to re-evaluate your entire budget and see where you can trim expenses elsewhere to compensate for high utility bills. You could also look for a way to increase your income. Either way, come up with a plan to make sure you can keep fitting your utility costs into your budget.
Plan Ahead to Mitigate Surprises on Your Utility Bills
It’s not fun to watch your utility bills go up each month, but that’s the reality for most of us. And chances are we’ll continue to see those increases as providers raise rates and we experience extreme seasonal temperatures.
So now’s the time to check your budget so you know exactly how those utility costs are fitting in — or not. And if you realize that your expenses aren’t aligning well with your income, it might be time to make some changes. Replacing outdated HVAC equipment can be a significant upfront expense, but it may be worth it if you save a lot of water and energy over time. Run the numbers, and decide what’s right for your home.
Creating a realistic, effective budget is just one aspect of financial management. You also have to think about saving, retirement, taxes, and charitable contributions. If you’d like support, advice, and encouragement to wade through all those decisions, Guiding Wealth can help. Our financial planning team will help you create a comprehensive plan to reach your goals. Schedule a consultation to get started.