So, you’ve been able to nail down your standard monthly budget. Good job! Honestly, that is such a feat and you ought to be proud of yourself. Budgeting is hard even for the most financially experienced. But now you may be wondering what about those odd expenses that don’t happen every single month or even every quarter. What about those larger costs that come once, twice, or three times a year? How are you supposed to budget those expenses in? Things like insurance payments, occasional big consumer purchases, home maintenance, large subscription services, vehicle registrations, and the like.
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These are important expenses to keep in mind that can be hard to budget for when you operate within a monthly budget framework like most Americans. However, there are some helpful strategies that can make budgeting larger expenses easier and fit them into your current system.
Best Tips for Budgeting Larger Expenses
- Figure Out What They Are
To make this whole process easier for yourself, take the guess work out of it. Pull up last year’s bank statements if you have access to them and use a highlighter to identify those bigger irregular and non-monthly charges. If you have reason to believe you will have the same expenses this coming year, then copy them down.
- Add Up Those Expenses
Grab your calculator and add up all those irregular expenses so that you have a total yearly cost for them. Having an actual number will help give you clarity on what money you actually need to have yearly to cover these expenses.
- Divide the Total for Monthly Costs
Take that annual total and divide it by twelve so you can have a monthly expense which will total the yearly expense. See whether this monthly total fits into your current budget. If it does, then you are all set. If it doesn’t, then take a look at what areas you can cut back on which might not be as necessary as these larger expenses.
- Open a New Account to Streamline Payments
Now just knowing the monthly expense doesn’t mean that you will automatically not spend it. If that money is just sitting in your checking account at the end of the month since that charge has not rolled around yet, then you are likely to spend it on other things. That’s why it is a wise idea to open a new account where you can transfer the budgeted amount every single month, so you know that whenever the irregular expenses come around you have money sitting there ready to cover them.
- Planning for Unplanned Expenses
Doing this extra prep work will get you a long way, it’s true. However, it doesn’t mean you won’t still occasionally be caught off guard completely by certain surprised expenses. That is why it’s smart to try to plan for all unplanned expenses ahead of time if you can by having an emergency fund. However, not everyone has the means. And those are the moments when you may turn to family for help, use your lines of credit, or get a personal loan like an auto title loan.
If you have the ability, add a bit of extra cash to your larger expenses account and this could prepare you for future expenses. Or think about putting work bonuses or cash gifts into that account so you don’t have to rely on others or debt. You’ve got the discipline it takes to turn your finances around!
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