How I Plan For Irregular Expenses

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My wife and I have done a good job of controlling our spending and saving money. For the most part, we know how much we spend each month and have been able to budget our money so we have enough left over for building our emergency fund as well as putting away for long term saving goals.

Everything goes swimmingly until we get notice that our $400 car insurance is due next month or we have our 6 month dental check-up. Costs like these are so irregular that they’re easy to forget. When they do come,we usually have to dip into our emergency funds for these not quite emergencies.

This arangement annoyed me, so I sat down last week to figure out how to plan for these irregular expenses. Here’s what I did.

Write down all your irregular expenses and how much you usually spend. For me, my irregular expenses include car insurance, car maintenance, Christmas shopping, and doctor/dental visits.

Add up how much you spend on each irregular expense and divide by 12. The outcome is how much you’ll need to put away each month in order to cover your irregular expenses when they come up. Instead of dipping into my emergency fund, I’ll already have the money.

Open and ING Electric Orange Checking account. I’m stashing my irregular expense money in the ING Electric Orange account with a 3.93% interest rate. Because these expenses happen every 3-4 months, I’ll be able to earn some decent dividends.

Use your ING Account for these expenses. I like keeping this money separate from my normal accounts. It keeps things easy and organized.

My wife and I are putting about $140 a month aside into this account. In order to make this work, we had to reduce the amount we put into our investment accounts a little. I definitely think it’s worth it. We were only fooling ourselves of our financial position by not taking into account these expenses. Sure, by not putting money aside for these costs we can invest extra or put more money in our emergency fund, but when these expenses come up, we have to take the extra money we stashed in an emergency fund and spend it. It’s kind of a blow to our psyche. Now we’ll always know that we have money for these irregular expenses.

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7 Comments

1. Helen on 18.07.2007 at 06:58 (Reply)

   You think Christmas is a irregular expense? Hum, that’s interesting. That comes every Dec. Start a Christmas fund. I’ve done that for years. By Nov. I have my funds for holiday shopping and know what I can spend.

2. Shannon Bolt on 18.07.2007 at 08:27 (Reply)

   Ditto to what mom said. Car insurance?? That comes every 6 months or however you have it set up. You could set aside the money every month and then you would have it when it was due. Or see if you can pay your car insurance every month, like as just one of the bills you pay. I have done that ever since I started paying for my own insurance. That way you don’t have to save for it.

3. Inside The Mind Of An Automotive Geek on 18.07.2007 at 21:07

   Car Insurance Rates Continue to Drop…

   Insurance.com, America’s biggest online auto insurance agency, in its most recent report, said that car insurance rates continue to decrease depending on the geographical location. The company’s “2007 Mid-Year Auto Insurance Pricing Report” shows a…

4. SingleGuyMoney on 21.07.2007 at 18:56 (Reply)

   I’ve started doing the same thing for my irregular expenses. Mine consists of car insurance, car maintenance, and an emergency fund for my rental property. I used to charge those on a credit card but now I have this account. Feels good to be able to pull the money from my own account and not have to borrow from the credit card companies.

5. rob in madrid on 23.07.2007 at 23:34 (Reply)

   My Dad has done that for years, always set the same amout aside each month for all his bills. It’s a habit I never picked up on, along with paying for things cash. That’s starting to change as we’re getting used to saving up for things.

6. The Frugal Law Student » Blog Archive » Tantric Shopping In Practice: I Want A MacBook!! on 20.09.2007 at 13:14

   […] I don’t have the money. Well, I do have some money, but it’s in our emergency fund and Freedom Account. No way am I going to raid those coffers just so I can instantly gratify myself with a new Mac. […]

7. CarFan on 11.03.2008 at 20:33 (Reply)

   Great tips. Making a total for each bills that comes in at different interval and dividing this by 12 make sure you have the amount aside and ready when the time to pay comes.

   A few week before some of my bills come, like car insurance or home content insurance, I make sure to review the policies and get some new quotes (easily done on the internet within minutes). This way I keep on top of these necessary high expenses and make sure I don’t miss out on additional savings by switching to a better company if I find one.

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