Work-from-home jobs are increasingly common in the post-pandemic landscape. Typically, the default assumption is that remote work automatically saves you money. For example, the average commuter spends $867 on commute-related fuel and $410 on commute-related car maintenance annually, and those are expenses you’ll no longer have to shoulder.
However, while spending in certain budgeting categories often declines, other costs may rise. As a result, it’s wise to explore budgeting tips that are designed specifically with work-at-home professionals in mind. That ensures you can capture savings opportunities and plan for shifts in your spending. Here is a look at 15 essential work-from-home budgeting tips that can get you on the right track.
1. Food Spending Changes
Working from home can save you money on dining out if you traditionally purchased lunch or coffee when you were in an office. However, if your workplace previously made snacks, coffee or other food items available for free, you may spend more on food if you’re working remotely. Additionally, even if that isn’t the case, your grocery bill will increase since you’re eating at home more often.
Your costs may also rise if you decide to use food delivery services in lieu of making meals at home. In this case, you could actually spend more overall, as delivery fees, higher prices and tips all add up.
Ultimately, you need to examine how you intend to eat while working from home. Consider the costs associated with various approaches and compare them to your usual spending patterns. That allows you to budget accordingly.
2. Home Office Expenses
Whether your home office works for you or against you financially depends on the nuances of your situation. Self-employed individuals can potentially deduct the value of their physical office space – based on an IRS formula – as well as certain pieces of equipment or furnishings. As a result, that can offset some of your spending.
If you’re a W-2 employee for a company, you aren’t eligible for the home office space tax deduction. Additionally, deducting the costs of furnishings or equipment typically isn’t an option either. As a result, a new desk, chair, scanner or similar items that you decide to purchase are out-of-pocket costs.
In some cases, you can talk to your employer to see if they can provide you with required equipment or technology relating to the performance of your role. However, if the company views it as optional, you may need to budget for these expenses.
3. Office Supplies
Similar to the point above, working from home usually means spending more on office supplies. You’ll need your own pens, paper, scissors, staplers, files and much more, depending on your line of work.
While the per-item cost of office supplies is typically low, it’s an area you need to prepare to cover. Additionally, like home office expenses, you can’t deduct them on your taxes if you’re a W-2 employee, so keep that in mind. However, if you’re self-employed, they’re potentially deductible.
4. Increased Utility Usage
When you’re working from home, spending more on utilities is common. You’ll use more water and electricity during the day since you’re not heading to the office, and that can lead to a noticeable increase in your monthly utility bills.
On average, energy costs for remote workers are $40 to $50 per month higher than their pre-remote work bills. While you can take steps to improve your energy efficiency, offsetting all of the increase might not be practical. Since that’s the case, monitor your initial bills after you start working from home to adjust your budget accordingly.
5. Internet Upgrades
Having a reliable internet connection with ample speed is often a must if you’re working from home. If you had a relatively low service level before, then upgrading to a higher tier of internet service could be necessary to support telecommuting. As a result, your monthly bill may rise by $10, $20 or more depending on your new service needs.
6. Connectivity Redundancies
In some cases, remote workers need a plan for unexpected internet outages at their homes. This could include purchasing cellular-based services like physical hotspots or smartphone tethering.
Some providers do include tethering for free if you have a qualifying smartphone plan. However, others have caps – triggering charges if you exceed them – or require plan changes to activate the feature. Additionally, going with a mobile hotspot device means purchasing the hotspot and a compatible data plan. In some cases, that can add $10 to $80+ to your monthly bill, not including the price of any devices.
7. Personal Care Expenses
Generally speaking, your personal care expenses can decline when you work from home. Going longer between haircuts, skipping makeup on most workdays, and utilizing similar money-saving options may be available.
However, if you consider your personal care routine to be a type of self-care, the extra time you have after eliminating your commute could lead you to spend more. After all, options like putting on a facemask before handling a task are on the table when you aren’t face-to-face with coworkers. Since that’s the case, you may choose to invest in new products beyond what you typically would.
8. Social Spending
Similar to the point above, your social spending may increase or decrease when you transition to working from home. If you typically joined colleagues for an after-work drink, you likely won’t when you start working remotely, which leads to savings. However, spending less time around others could lead you to go out with family or friends more often, or gather with coworkers for more expensive outings as a form of compensation.
Ideally, you want to calculate your previous spending levels as a starting point. Then, estimate how your social life will change and what you’ll do to maintain a sense of connection, allowing you to update your budget.
9. Career Development
Being in a physical workplace often makes it easier to access certain training opportunities, such as direct instruction or mentorship from a colleague. Some companies do have eLearning platforms that are accessible to remote workers, but that isn’t universally available. Plus, they may not cover all of the skill areas you need.
Potentially, this can lead to unexpected career development costs. You may need to subscribe to learning platforms or pay for individual courses to keep your career on target, something you may not have worried about previously. As a result, you may need to add a new career development line item to your budget.
10. Insurance
In some cases, standard renter’s and homeowner’s insurance policies may not cover certain business-related property. As a result, you might have to add business coverage to your policy, which can raise the total cost.
11. Childcare Costs
Working from home may make all-day daycare or afterschool care unnecessary. However, those savings may be offset if you need support from an outside caregiver. Hiring a babysitter or tutor to cover times when you can’t supervise your children directly does come with a price tag. While it may be less than what you were spending previously, it’s critical to factor it into the equation.
12. Transportation
While eliminating a commute often results in savings for anyone who drives to work, it can actually cost you money if you previously received public transit benefits through your employer. Once you start working remotely, you may not be eligible for this perk. As a result, you might have to spend more to get around town than you did previously.
Additionally, some employers offer other transportation incentives designed to reduce commuting costs. Once commuting isn’t part of the equation, those may be eliminated, too. Consider how reduced transportation benefits alter your day-to-day transportation spending. Then, research what it will cost to make up for the deficit to get your budget in order.
13. Wardrobe
Working from home usually means you don’t have to wear business attire daily, which can reduce your spending on clothing. However, if you don’t have suitable attire for a work-from-home arrangement, you may find yourself purchasing a new wardrobe to keep yourself comfortable. As a result, you might spend far more on clothing than you expect, especially when you initially make the transition.
Go through your attire to see what works well for your new lifestyle. Then, create a list of what you need and do some comparison shopping to estimate prices. That allows you to adjust your budget to account for this expense.
14. Gym Memberships or Fitness Equipment
If you work for a company that had a gym on-site that employees could use for free, working from home could mean having to get your own gym membership or fitness equipment. In either case, that impacts your budget.
A gym membership may cost anywhere from $10 to $100 per month, depending on your location. If you opt for buying your own equipment, you could spend less than $100 on basic equipment – like hand weights – or upwards of $1,000 if you start looking at treadmills or similar items. Regardless, you want to adjust your budget accordingly.
15. Self-Employment Taxes
If working from home comes with self-employment, you’ll owe more in federal taxes than if you were a traditional W-2 employee. Since you’re essentially operating a business as a sole proprietor (even if you don’t formally form a company), you’ll have to pay the self-employment tax.
Essentially, you have to cover the Social Security and Medicare taxes that are usually paid by employers. While there is also a related deduction to lower your adjusted gross income, it’s still a sizable amount to cover. Make sure you set enough aside for your quarterly estimated tax payments, so factor that into your budget.
