How Make Sure Big, Intermittent Expenses Don’t Bust Your Budget
If you’ve created a budget and still find yourself short at the end of the month, it may be due to big, intermittent expenses. These are the bills that while not necessarily unexpected, they’re not foremost in your mind either. For our family it’s insurance premiums, POA dues, property taxes, and the annual termite inspection. By identifying your once or twice a year expense and planning ahead, you gain a lot of power over your financial situation.
Keep Track of Intermittent Expenses
Make a list of bills that only arrive once or twice a year or quarter. Keep adding to this list every time you come across another one. Once you know what bills are coming due in the future, you can start saving up for them. It’s as simple as dividing the amount by 12 and setting that money aside, preferably in a separate account. If you conduct banking online, it’s easy to transfer from one account to another. Keep track of amounts you’re saving for future expenses on paper or in a simple spreadsheet. When the bill comes in, there’s no stress because you’ve saved up for it little by little over the course of the year.
One time this comes in super handy is at Christmas. When the holiday expenses pile up, it can cause a lot of unnecessary stress and wreak financial havoc if you’re not careful. Saving up gradually for the big hit in December can make that time of year a lot more enjoyable.
Save For Important Purchases
Once you’ve mastered the system, you can start to use the same technique of setting aside money for expenses to save for those big ticket desires. For example, right now I’m setting aside money every month to eventually replace my husband’s ten-year-old car.
Note: Take a tip from Suze Orman – before you get into debt on a big purchase, set aside the amount of money you’ll need to make the payment each month before you actually take out the loan. Not only will you find out if you can afford the increase in monthly expenses, but you’ll also save a tidy down payment!
Vacations, home improvements, major electronics – these are all things you can set aside for each month until you have enough to pay cash. This will save you the interest expense and ongoing obligation of credit!
What ideas do you have to stay out of debt?
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