Some expenses only happen a few times every year: car maintenance, certain insurance premiums, birthdays, holidays, etc. Because these expenses happen so infrequently, it’s hard to budget for them. You may not be able to add a budget line item in your January budget for $600 car maintenance or in July for the $2,000 property tax. You have to prepare for large, one-time expenses, preferably months in advance.
I don’t like surprises in my finances. I try to plan things in advance so nothing sneaks up on me. For example, I always start planning for Christmas several months in advance so I’m not trying to cram all the holiday shopping into one month’s pay. I do this with car maintenance, insurance premiums, and a few other expenses.
Create a Monthly Bill Pay Calendar
You can plan for infrequent expenses with a simple calendar that lists all the months. Next to each month write down the periodic expense and the amount. If you don’t know the exact amount, just write an estimate. For example, the first few months of your calendar may look like this:
- January – Mom’s Birthday: $50
- February – Valentine’s Day – gift for spouse: $50, cards and candy for kids school: $30
- March – car maintenance: $75
- April – property taxes: $1,200
If you’re creating your calendar now, go ahead and start with September. That way you can start thinking about what’s coming up the rest of the year and then look ahead for next year. Keep your calendar on a rolling 12 to 24 months to have a good view. The further ahead you can look, the better you’re able to plan. Putting the expenses on a paper timeline keeps you from having to manage everything in your head – a place where things can easily get lost.
Save Up for Large Expenses Over Several Months
Once you have the next twelve months (or so) of expenses, start working them into your budget. Smaller expenses, like birthdays and small holidays, may not need as much future planning if you’re not planning to spend a lot of money on them. You can probably cover these out of your regular monthly budget. It’s the big items – like property taxes, major car repairs, and back to school shopping – that you have to look out for.
Break your larger expenses into several small payments, depending on how many months you have until the expense occurs. For example, if your $1,200 property tax is due in April, you have 8 months to save up for it. If you set aside $150 each month until then, you’ll be ready when the tax notice shows up in the mail.
Make Your Savings Plan Fit Your Budget
It becomes a struggle and a juggling act when you’re trying to save up for several things at the same time. For example, you might be saving money for Christmas at the same time you’re saving for your property taxes. You can save for multiple expenses at the same time, or you can save up for the one that’s closest first and when that’s done, start saving for the next one. How you structure it depends on how much money you can set aside for these future expenses.
For example, if you have $400 to put toward future expenses, you could set aside $150 each month for Christmas (to have $600), $150 each month for the taxes due in April, and have $50 left to save up for another upcoming expense. On the other hand, if you only have $250 to set aside each month, you may have to reduce your Christmas savings goal to $400, or $100 a month, so you’d still be able to save up for your property taxes.
Looking at big expenses far in advance helps you know months ahead whether you can afford them or not. That way, you can adjust your spending or take on more projects to meet all your financial obligations.