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Irregular expenses are part of life and we simply can’t plan for every possible thing that may come up.
But if you take some time to review your annual spending, you will see the typical periodic expenses that you encounter.
So with a little planning ahead, you can take the sting these budget busters have on your bottom line.
In this post, I share with you a few methods for how to budget for irregular expenses that will help you avoid going over your budget every time these expenses come up in your life.
Table of Contents
7 Methods To Budget For Irregular Expenses
#1. Form A List of All Your Irregular Expenses
The first step in planning for irregular expenses is to understand what they are exactly.
After all, you can’t properly budget for them if you don’t know what these items are.
Before we dive into some of the categories and examples, let’s take a moment to understand the difference between irregular and variable types of expenses.
Variable expenses are expenses with an amount of money that fluctuates over time.
Take utility bills for example.
The amount that we have to pay for electricity doesn’t stay the same because we may use more electricity during a colder month or warmer month.
However, that doesn’t make it irregular.
Even though the amount of your electric bill changes or varies all the time, it is still one of your regular monthly bills you have to pay every month.
It comes on a regular basis.
For this article, we are going to use the term irregular to describe expenses that don’t make an appearance on a monthly basis.
Discretionary expenses like taking a vacation are not something that we do each month.
The same goes for annual expenses like property taxes.
As such, budgeting for them can be a bit harder.
Difference Between Irregular And Variable
With that in mind, an expense can be irregular and variable if you don’t know how much you will have to pay when it does come time to make a payment.
Continuing with the above, unplanned expenses are either irregular and predictable or irregular and variable.
For the former, a few examples of irregular yet predictable items include buying prescriptions that need to be renewed every four months or paying your annual insurance premiums.
We know that these items are coming in the future and we know how much we have to pay in order to take care of them.
For the latter, some examples include buying Christmas gifts for your family or paying taxes.
We know that these events are in the future, but we don’t have a crystal ball to know exactly how much we’re going to be paying to properly settle them.
The most crucial part of learning how to budget for irregular expenses means creating a comprehensive list of all of the expenses that don’t fit into your normal, monthly budget of essential monthly expenses.
If you have to do a little digging to find every irregular expense, it’s well worth it to avoid not having enough money to pay for it.
So take an hour on the weekend and review your bank statements from last year.
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If you pay for things on your credit cards, review these statements too.
Make note of one-off bills and other expenses that your paid during the year.
#2. Make Sure That You’re Actively Saving Money Each Month
The reality of periodic expenses is that you anticipate some of them while other ones may come completely out of the blue.
For example, you can budget for property taxes as you know that you’re going to have to eventually pay these in the future at the same time each year.
However, things like vehicle maintenance or car repairs are expected but an item that we can’t really include in our budget because we don’t know when something might happen to our car or how much it will cost us.
For unexpected expenses, it’s important that you set aside money each month in a savings account.
This savings account should be separate from your emergency fund as you will want to reserve that for serious situations where you find yourself unable to pay for something like rent or utilities.
This way, if you do have any unforeseen irregular expenses, you have money that you can use to pay these off without breaking the bank or going over your budget in the process.
#3. Create Savings Goals For Expenses You Can Plan For
Budgeting for these expenses is as simple as taking the time to figure out what you pay for on an inconsistent basis and how long you have to until you need to pay it.
For example, let’s imagine that you’re currently attending college.
You know exactly how much tuition will cost and when you need to pay it by in order to attend all of your classes.
Creating a space in your budget for this then becomes rather easy.
Simply take the amount that you’re going to owe, take the date into consideration, and separate your payment into the number of months you have left until you have to pay it.
Then, store that exact amount away each month until it comes time to make the payment.
For example, if your tuition is $5,000 a year and you have 12 months until your next payment is due, divide $5,000 by 12 to get $416.67.
This is the amount you need to save each month to have enough money to cover the bill when it comes due.
If you’ve set aside the correct amount, you will have successfully budgeted for that expense, and you will know exactly how much you have to carve out of your budget, no matter whether it’s an annual or bi-annual expense.
This can also apply to certain holidays or other savings goals that may not fall into the category of wants rather than needs.
No matter what it is you need to pay for, you can make sure you have enough money for these expenses once the time comes.
#4. Create Estimates For Irregular, Variable Expenses
So, what happens when you have an irregular expense that doesn’t necessarily cost the same amount each time you need to pay it?
These can be difficult to budget for as you never know whether you’re going to pay less than you expect or more.
When you have these types of regular expenses, creating an estimate based on similar payments you’ve made in years prior can help you figure out how much you might pay when the payment time rolls around.
If you do find yourself needing to pay more than you normally would, you can take some money out of the savings that you created in the first tip listed above.
While we can’t always anticipate every expense, an estimate does a good enough job as a placeholder until the actual bill comes.
Then going forward, we can use that bill as a guide for how much money to save.
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#5. Sign Up For A Separate Account For Irregular Expenses
Knowing that you’re allocating a certain amount of your funds towards a specific irregular expense is easy.
However, keeping all of your money in just one checking account makes it easy to overspend and forget exactly how much you want to allocate for your unplanned expenses.
This is why it’s important to have separate accounts for each of your needs so that you can stay on top of your funds.
Alongside your main checking account, which you will use for your predictable, regular monthly expenses, you should have a checking account dedicated solely to your irregular expenses.
This way, you can transfer the right amount of cash each month to this account.
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When it comes time to pay the irregular expenses in your budget, all you have to do is provide the account information or use your debit card when you have to make a payment.
No longer do you have to worry about double-checking how much you have in your one checking account or worrying about whether or not you can afford to pay that upcoming bill.
Another option is to open multiple savings accounts.
This is the trick I use.
I have savings accounts for our car insurance premium, life insurance premium, holiday gifts, our water bill, etc.
I rename each of the accounts to reflect the bill they are paying.
This makes it quick for me to see exactly how much I have for each expense and any given time.
I set up an automatic transfer when I get paid so I never miss a month of funding these accounts.
Then when the bill comes due, I have the money to pay for it.
#6. Set Physical And Digital Reminders About Upcoming Irregular Expenses
When it comes to monthly expenses like groceries, rent, or our phone bill, we’re well aware of how much we have to pay when we have to pay it.
The biggest issue we face when it comes to figuring out how to budget for irregular expenses is trying to remember these irregular items.
If it’s not on our minds, it can be easy to accidentally miss these bills and end up having to face the consequences.
Fortunately, you don’t have to let irregular expenses get the best of you and wreak havoc on your life.
There are two ways you can stay on top of your irregular expenses.
One way is to set bill alerts in your budgeting software.
If you have a budgeting app that you use to track your finances, it will generally have a feature that you can use to create notifications for upcoming bills.
You should set reminders for both the monthly amount you plan on setting aside as well as on the day that the expense is due.
You may also want to create calendar reminders on your digital calendar with links to your budgeting software so that you don’t miss the day.
The only problem with using software for reminders is that we don’t always check certain things regularly.
To create an added layer of protection for yourself, you should create physical reminders.
For example, if you have a bulletin board or whiteboard in your home, you should write down some of your upcoming expenses or post up a sticky note so that you have a constant reminder you won’t be able to miss.
This might seem like you’re going a little bit overboard, but it’s better to be safe than to end up missing a payment that you otherwise could have made on time.
Another option is to set up automatic bill pay with your bank or the merchant.
This way, when the bill is due, it will automatically get paid.
Of course, you need to make sure you have money saved so that you can pay the bill and not overdraft your account.
#7. Avoid Monthly Payment Plans
To combat the issue of irregular bills, many businesses allow customers to be billed monthly instead of twice a year or annually.
On the surface, this sounds like a great solution.
The problem is that most companies that offer this service, include a fee with your monthly payment.
As a result, you end up paying more money if you opt for the convenience of paying monthly instead of semi-annually or annually.
Car insurers are one of the biggest industries that does this.
While your semi-annual premium might by $750 or $125 a month, if you pay monthly, your bill is $130 a month.
Paying $5 more might not seem like much, but over a year it’s $60.
And if you do this with multiple companies, you can easily be paying over $100 a year for the convenience.
List Of Irregular Expenses
Since it does take time to comb through your previous year’s bills, here is a master list of typical irregular expenses you might have.
You can quickly run through this list of budget categories and know what to look for in terms of bill amount, saving you time.
- General Home Maintenance
- Appliance Repair
- Appliance Replacement
- Furniture Replacement
- Lawn Care
- Garden Care
- Pool Care
- Home Owner Association Dues
- Water Bill
- Sewer Bill
- Auto Insurance Premiums
- Life Insurance Premiums
- Disability Insurance Premiums
- Homeowners Insurance Premiums
- Umbrella Insurance Premiums
- Property Tax
- School Tax
- Estimated Tax Payments
- Vehicle Maintenance
- Vehicle Repair
- New Car Purchase
- Dental Cleanings
- Dental Work
- Medical Checkups
- Glasses/Contact Lenses
- Insurance Deductibles
- Lab/Technology Fees
- School Pictures
- Field Trips
- Testing Fees
- Vet Appointments
- Grooming Services
- Boarding Costs
- Membership Fees
- Hobby Supplies
Earlier I mentioned that it helps to have separate savings accounts for each of your irregular expenses.
I wouldn’t suggest you try to have one for every single one of the examples above.
For instance, if you have pets, do the math to figure out the total annual costs and then divide this number by 12.
Then create a single savings account for pet expenses.
The same goes for vehicle expenses.
Simply have one account for all these expenses and you should be good.
The only exception to this might be to have a separate account for a new car.
This is because you won’t know your vehicle maintenance and repair costs, only estimates.
If you save too little, you would be digging into the money for a new car.
By keeping this one separate, you can avoid this issue.
Learning how to budget for irregular expenses is not difficult.
It is something you can easily do.
It just takes some time the first time you set things up.
And there might be a few bills you miss when setting things up.
But once you have it up and running, you will find the process to easy to follow and you won’t have any irregular bills destroy your budget.
I encourage you to take the time to plan for these unexpected bills.
Not only will it improve your financial situation today, but also help to keep you one track to reach your future financial goals.
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.