One of my big financial goals this year was to successfully plan for my infrequent bills – things that come once or twice a year. Some examples include home and auto insurance, professional fees, and my property tax bill. None of these bills are unexpected and I’m certainly not surprised when they arrive, but for years, I was always unprepared for them and the expense would end up doing damage to my budget.
This year, I worked hard to make sure that I was planning ahead for each of these bills. It didn’t matter how large or small, I was going to be ready.
How to Start
The first thing to do is figure out what irregular bills or expenses you have. If you’ve got a budget for the last year, you can skim for expenses. Think about any annual memberships you have or appointments you make. For example, I always budget for my annual auto maintenance trip and my annual eye doctor visit.
Of course, this doesn’t just have to be for expenses. Maybe you want to have a certain amount of money set aside for a vacation on a set date or to spend on Christmas gifts.
Once you figure out what all of these expenses are, start breaking down the numbers.
Using YNAB Budget Categories
For me, the easiest way to do this was to setup budget categories in YNAB. If I knew I had a $600 bill due in December, I setup a savings goal to have $600 by December. Then YNAB prompted me to budget each month to attain that goal. Obviously, it should have meant just saving $50 a month. But if one month, I didn’t budget the full $50, that meant I owed more the following months. It definitely kept me on track and it was great to see those budget numbers climb.
Because I so faithfully use YNAB, I didn’t see the need to physically move funds to a separate bank account. But read on for a way to make that work.
Using Other Methods
I know that not everyone uses YNAB (though seriously, I adore it). But no matter what method you use to manage your money, you can figure out how best to set money aside.
Figuring out how much money total will likely be the hardest part. I recommend making a spreadsheet or table. Figure out what the expense is and when it is due. Ideally, you will have 12 months for every annual bill, but maybe you’re doing this now and your bill is due in July. Just break down the numbers. How much do you need to save each month to make that bill? Do this for each bill or expense and jot the amount down in monthly columns. Take the total and that’s how much you should put aside for “bills” every month.
It can feel like a lot – but it’s much less painful than suddenly having to find a spare $600 in your budget.
If you keep a budget, you may be able to just leave that money as a budget category, but you may also want to transfer the funds into a separate bill paying account to help prevent overspending.
Sometimes, as you look at these annual expenses and total up just how much money is going out, you might find “You know, do I really need this membership?” You might find that you are ready to let some of these things go, thereby saving money.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.