Planning for Non-Monthly Expenses

Even if you don’t consider yourself much of a budgeter, chances are you have a good idea how much your monthly expenses are versus how much you bring in for income. Spending less than you earn is the idea financial goal to keep your finances tuned up – and it’s possible without doing a whole lot of fancy budgeting techniques.

The problem is when your non-monthly expenses occur. Things like property or school taxes, insurance premiums paid annually or semi-annually, car maintenance, prescriptions and other medical expenses, and even holiday shopping. If you aren’t prepared for the non-monthly expenses, coming up with the cash can be difficult – and can throw your entire financial situation off track for awhile.

How to Deal with Non-Monthly (irregular) Expenses

Many people without a budget simply try to pay for annual and other irregular expenses as they happen. This “plan” is what causes many people to wake up with the Christmas hangover on their credit cards in January; and people frantic in April when their income taxes are due. Even people who are able to get enough cash together to pay for the irregular expense are typically feeling poor and inadequate for the next two months as they ‘recover’ from the expense.

Some people simply charge any non-monthly expense to a credit card and pay it off in smaller installments afterwards. The problem with this method is that you’re paying 5%… or 25% more than the original amount charged on the credit card thanks to credit card interest rates. Make one payment a day late and you’ll pay even more. This is not an idea way to pay for your non-monthly expenses – unless you are able to secure a 0% interest credit card – even then, a better way to make your irregular expenses more like clockwork is to make them a regular payment.

Instead of having a panic attack each time your taxes are due or it’s time to do your holiday shopping, why not figure out approximately how much you need for these non-monthly expenses and turn them into a monthly expense? This way, you’ll prepare for them all year, in small payments, and enjoy having the cash on hand to make the payment without stress when it comes due. Take all annual expenses and divide them by 12 to find out how much you need to be setting aside per month to pay for it. A $2,000 tax payment would require $166.67 set aside per month.