Budgeting is one of the most important aspects of organizing our lives. But, far too few people ever truly stick to a budget long-term. Why’s that? Because budgeting seems too difficult or boring to pay close attention to. Many of us would prefer to “set it and forget it” and hope you come close to your projected income and expenses for a given month.
Unfortunately, attention to detail is crucial when it comes to budgeting. That’s because irregular expenses and income can mess up your calculations pretty quickly if you’re not paying attention.
Even if you enjoy crunching numbers, irregular expenses like semiannual insurance payments or annual publication subscriptions can make budgeting quite complicated.
If you’ve been following a monthly budget but you need a better way to incorporate irregular or fluctuating expenses into your future projections, then here are some ways to seamlessly integrate intermittent expenses into your regular budget.
How to Include Irregular Expenses into Your Monthly Budget
Save Money with Quarterly or Annual Payments
Monthly payments may be more convenient when it comes to planning out your budget. But, you can save quite a bit of money by opting for three, six, or 12-month payment plans instead.
From gym memberships and newspaper subscriptions to auto or life insurance, companies tend to charge consumers discounted prices for payments made in advance. If there is a discount for paying for a service semiannually or annually and you can afford this upfront expense, then sacrificing convenience for monetary savings is likely worth it.
Create an Annual Budget and Divide by 12
Whether or not you have a choice over how often you make irregular payments, you still need to develop effective budgeting strategies to ensure you don’t break the bank during a particularly expense-heavy month.
You don’t need to be good at math or have expensive budgeting software to do all the work for you. Just create a list of all your anticipated expenses between January and December, then divide that figure by 12.
Even if a majority of your expenses and bills are paid for in April and October, for example, you’ll know how much money to set aside every month to ensure your expenses are accounted for.
Create a “Misc.” Fund
Do you know the difference between an emergency savings fund and a miscellaneous fund? The former is dedicated to completely unexpected expenses (e.g., the family cat needs leg surgery or your child shatters one of their permanent teeth during a sports game accident). Meanwhile, the “Misc.” fund should be much more accessible because you’re diverting money into it for the purpose of paying off expected bills and expenses coming in the near future.
Without a “Misc.” fund, you’ll either go over budget for one month or have to siphon money from your emergency savings to pay for irregular expenses. This isn’t the end of the world, but your emergency savings fund should not be treated like any old savings account. It’s for emergencies only!
Save More Than You Need
This may seem obvious, but all too often, people save exactly how much they think they’ll need without remembering that some costs can skyrocket over time. Even if you’re on a limited income, you can start saving and get ahead by overestimating how much money you’ll need.
For instance, if you typically pay between $350-$400 for your semiannual auto insurance payment, then aim to save $900 or even $1,000 instead. This way, you won’t have to panic if you get in an accident and your premiums go up.
You don’t want to dip into your emergency savings fund for an expense you were expecting, so saving a little more than you think you need can help you stay on track without blowing your budget.
It’s not easy trying to account for irregular expenses, especially if you’re dealing with an irregular income as well. Even if you’re living below your means on a fixed budget, it can be quite a challenge to come up with a few extra hundred or even thousands of dollars in the span of a month or two. That’s why saving for upcoming expenses is so important.
As long as you opt for the cheapest payment options available and allocate a set amount of money each month into your “Misc.” fund to pay the bills later, then your financial stability should remain a non-issue when irregular bills and payments crop up sporadically throughout the year.