Budgeting for Irregular Expenses

Irregular and non-monthly expenses are budget busters. Successful budgeting requires that you take into account all your expenses, not just your normal monthly expenses.

Non Monthly expenses can be classified as any predictable expense that is paid other than monthly.

  • Many Insurances are paid quarterly or annually.
  • Property Tax and Vehicle Registrations
  • Back to School clothes and checkups
  • Christmas and Vacations
  • Pet checkouts and vaccinations

Irregular Expense are those that both the timing and the amount of the expense are hard to predict

  • Repairs and maintenance of the house, the car
  • Medical Expenses
  • Vet Bills

Although we may be unable to predict the exact amount or due date for an irregular expense, we know that they will occur. Stuff breaks, people and pets get sick, babies are born and roofs must be replaced.

To handle both irregular and non monthly expenses use sinking funds. Sinking Funds are basically just named savings accounts. Start by making a list of all your expenses that occur non-monthly with the amount and the due date. Now make a list of irregular expenses that you can expect. To help you build your irregular expense list, think of everything you own that will need to be replaced or repaired.

How long will you keep your car ? Let’s say you are willing to keep your car until it has 150,000 miles or for about 10 years. If you’ve already had it 5 you need have 5 years to save up enough to buy a replacement. Decide what you will be spend for a replacement, let’s say $12,000, that means you need to put $200 a month into your car replacement sinking fund starting now.

Here’s a detailed example of how to set up and use a Sinking Fund.