Law School
Personal Finance

How I Plan For Irregular Expenses

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.