You know you need to get new tires for your car each time the tread wears thin, it’s still surprising each time the massive bill is due, right? Sometimes, no matter how adeptly you follow your monthly budget, you may find yourself tripping up. Irregular expenses like those tires could be to blame. Irregular expenses are bills you know are coming but may not have a fixed amount and don’t occur monthly. However, there is a way to prepare for them without relying on your emergency fund every time something comes up.
Irregular expenses often include:
- Athletic club memberships
- Insurance premiums
- Auto care
- Pet care
- Clothes and shoes
- Annual fees
Prepare to Pay
Set up an irregular fund. This account should be separate from all other accounts and should be easily accessible. A simple savings or money market account with your primary financial institution will work well. You could bury it in a coffee can in the backyard, but financial institutions tend to be a little cleaner and may offer interest.
Pay your irregular expenses solely from this fund. However, if a big bill is due early in the year and you haven’t built up your fund yet, dip into your emergency fund for a month or two. Just remember to make your monthly irregular fund payments to your emergency fund until you build it back up.
Prevent Budget Blowout
Make a list of every irregular expense you can think of for the entire year and assign each a dollar amount. Not sure where to start? Examine last year’s expenses. How frequently did you get a haircut or take your pet to the vet? Tally up oil changes, tire costs and tune-ups. Review how crazy you went for birthdays and the holidays.
Now divide the total by 10. That’s the amount you should set aside every month for your irregular expenses. Yes, there are 12 months in a year, not 10, but you’ll be grateful for the buffer. Stick with 10.
Tips to Stay Ahead
- When you pay your car off, continue to put the monthly payment in a new car fund. That way you’re not caught flat-footed in case ol’ Bessy kicks the bucket.
- Build your fund quicker by selling books, electronics, and other items you no longer use. Sell your old clothes at a consignment shop to pad your fund for new threads.
- Negotiate your rates. Call your providers before home, life and auto insurance premiums are due to see where you can save.
- Review your irregular expenses annually to plan for the next year.