Posted by Mike Smith :: August 25, 2008 @ 8:57 am

The recent heat wave in the Midwest, earthquake near Los Angeles, and signs that hurricane season has begun all remind us that there are many ways the weather can impact your budget. Weather-related expenses should certainly be part of your plan.

While natural disasters might seem like the main cause of weather-related costs, less dramatic weather can cost you more as well. The effects of an unusually hot summer or unusually cold winter also can be devastating.

Emergency funds are a great way to handle unexpected expenses. Building up a cache of 3-6 months’ worth of expenses is widely advised by those in the financial planning realm. This is certainly good advice that I also recommend. You have to remember, though, that some emergencies are hard to identify. Higher electric or gas bills due to an extended heat wave or cold snap are emergencies, but they are just spread over a longer time period and don’t have a defining event, such as many other natural disasters.

You may choose to simply plan to have some higher weather-related costs at some point during the year instead of using your emergency fund to cover such expenses. I’ve noticed that my water, electric, and gas bills all swing wildly throughout the year, but the total of the three bills tends to be fairly constant. I use the most gas in the winter, the most electricity in the summer, and the most water in the spring and fall. By budgeting for these items in combination, I see fairly consistent costs each month and can easily identify any time I have a large jump in the group. Padding this budget item by 10% also allows me to handle such jumps without having to dip into my emergency fund.

Like most aspects of budgeting, investing, and saving, planning ahead for weather-related costs makes their occurrence almost a non-issue. If you get lucky and get through a year without any such costs, you’ll have some surplus funds in your budget and if the weather inevitably does cost you, you’ll be ready for it.