Budgeting Those Infrequent Expenses

Are you prepared for your quarterly water bill or your annual car insurance bill? How about Christmas? If not,you may not be alone.

Most of us start budgeting by first tracking our expenses for a couple of months, and then creating a spending plan based on your income and what you think your monthly expenses are. If that is what you did, you would have soon found out that the budget wasn’t really going according to plan. You see, most of us have expenses that come out of left field throughout the year, usually at the worst possible time. An effective budget accounts for all of these expenses and leaves little room for surprises. Here’s how you can fortify your own budget against financial surprises:

1. First, figure out what your infrequent expenses are. Do you buy birthday presents for certain people every year? You need to budget that. Do you have to recertify a professional license every two or three years? You need to budget that also. Your excise tax? Your car’s registration fee? Eye contacts? You guessed it, all of those should be on your monthly budget! I also plan for Haircuts, firewood, car maintenance, and home maintenance, among many others. 

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2.            Just how do you plan for these items? If you want to avoid being surprised by these and many other infrequent expenses, you must put money aside each and every month for all of them. You can do this by creating an “infrequent” items list to your budget, and figure out how much you should save for each item every month to make things work. For example, if your car insurance is $1,200 for the year, you need to save $100 every month to cover that expense ($1200/12). If your professional license needs to be renewed every two years and costs $60, you need to budget $2.50 monthly ($60/24). Currently, just under 20% of my budget is comprised of these items, as you can see below (my total budget is just over $6,000 monthly).

  

So, every month I budget $1,072.50 for my irregular expenses. As you can see, I have only spent $612.40 thus far. If this remains unchanged, the remaining $460.10 would go into abeyance until it is needed in a future month. Some folks move that difference into a special savings account, while others let the funds sit in their checking accounts. Regardless, you will enjoy knowing that very few budget surprises are happening in your future!

Do you follow a similar process for infrequent expenses? If not, please share your method in the comments below!