How to Budget for Irregular Expenses
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Working out a solid home budget is an important part of getting your finances in shape for 2012. While most people have a noble goal of getting out debt, they don’t always put together an accurate home budget.
Dealing with Irregular Expenses in Your Budget
It’s easy to input the expenses for a home mortgage and car payment. But there are other very important expenses that are often neglected.
Trying to pay for an annual membership in one lump sum can leave your budget hurting when the time comes. Soften the blow and simplify your life by making this a monthly expense.
Add up all of your annual memberships to come up with a grand total. Divide that by twelve and you have the amount that should be set aside every month.
Be religious about putting this to side to avoid being short when the renewal hits your mailbox.
Most mortgage companies require that the property insurance is escrowed along with the property taxes. If yours does not, however, then you must carry the property insurance on your own.
This is not a negotiable expense that can be paid or not based on how the month is going. It is just as important as your grocery budget and the rent payment.
You can make it more affordable by choosing a higher deductible, but you should make sure that you are covered and that the payments are made on time every month.
All work and no play will make you crazy, but vacations are expensive. Try to also set aside a monthly amount to cover a vacation. It will allow you to pay cash when the time comes, and you can start planning something early to build the excitement.
Holidays and Special Occasions
You know that it’s easier to shop for those holiday presents throughout the year, but most people don’t set aside money for it. Create a little slush fund just for gifts.
Start by sitting down and adding up how much money you spend on presents throughout the year. Include little items you buy for co-workers and friends. Determine the monthly amount and then create a little slush fund just for these occasions.
Most people don’t put this in a budget because it’s not a regular expense. But when something breaks, you are going to have to pay to have it fixed or replaced.
It’s hard to determine how much you should allow for repairs. You can start by considering how much money you spent last year on various repairs and then dividing that by twelve. You can also simply set aside twenty or thirty dollars a month and adjust that amount at the end of the year. If you have older cars, you might want to set aside a little more.
Back to School Shopping
Parents with kids going to school for the first time are often shocked at the high cost of back to school. You can easily drop between fifty and a hundred dollars on each child’s school supplies, and that doesn’t count the cost of new clothes and shoes for the year.
This can leave you scrambling when August rolls around, or sending your children off to the first day of school without their basic school supplies. You also have expenses throughout the year for class pictures, extra-curricular activities and field trips. Take the sting out of these events by setting aside some funds every month.
The tax man cometh; and you need to have the funds ready to make the payment. Cash rewards and other perks will arrive without the companies withholding any taxes, but you will still have to claim them as income and pay the taxes at the end of the year.
Any time you receive extra money that was not taxed, pull out ten percent and put it in a separate account. Property taxes that are not escrowed through a mortgage payment must be covered. Many a home has been lost to the government because the property taxes were not paid in full. Set up a savings account for the property taxes, and make monthly payments into that account.
Thoughts on Budgeting for Irregular Expenses
Home budgeting doesn’t have to be difficult. Taking control of your finances with a solid budget can help you create a better financial situation for yourself.
You can create slush funds to handle life’s little surprises. You can also turn all of those annual expenses that are so painful into monthly ones that you barely notice.
Photo by Karolina Grabowska
With our budgeting we seem to exclude entertainment, clothing, etc. These are not essential items, but we are out of debt (except the mortgage!) and so we should certainly let loose and enjoy a bit.
Happy to hear your debt free except the mortgage!
Self employment and seasonal work forces us to break down our expenses into bite size pieces. We have an emergency fund and I carry three envelopes with cash for food, miscellaneous, and fun! Because we live in ‘vacation land’ we don’t take vacations. We go out kayaking, hiking and camping right where we live, mostly within minutes of our home. We are blessed but we also planned life this way. The older we get the more simple we like life and that includes finances.
Sounds like fun – maybe this year my husband and I will set aside time and go whitewater rafting.
I’ve found that the Misc. portion of my budget seems to be a monthly constant, even though I only use the category for unusual expenses. This month it was a damaged tire that needed replacement. The month before, it was a parking ticket. It’s strange, but random things seem to consistently occur.
I’m glad you pointed that out Shaun – I’m starting to realize that as well. Last month our biggest expenses were related to the waves of visitors we had.
I had to start putting aside monthly amounts for my car insurance. I normally pay it annually and it always hurts that month. I have automatic withdrawals from bank account every month and I pretty much stopped noticing the amount.
Yeah; we do the same with life insurance (semi-annual though) and it always is a bit tighter when the cash comes out.