Everyone must save for three things: (1) Emergencies, (2) Known Upcoming Non-Monthly Expenses, and (3) Dreams
Of these three, it seems like saving for #2 – Known Upcoming Non-Monthly Expenses is the most difficult and creates the most issues with budgeting.
Here’s why Known Upcoming Non-Monthly Expenses create severe budgeting difficulty:
- They are non-monthly Because of this, we tend to forget about them until they show up
- They are usually larger expenses Property taxes, insurance premiums, Christmas, vacation, car maintenance and repairs, and insurance deductibles usually have larger price tags than typical monthly expenses
- We don’t save for the expenses monthly We wait until the bill arrives and then we are forced to scramble in an attempt to pay for it
This is why I call these type of expenses “Budget Crushing Expenses.” You can avoid this stress entirely by creating a Known Upcoming Expenses saving plan!
Here’s a step-by-step way for you to eliminate “Budget Crushing Expenses” from your life:
- Download our free “Known Upcoming Expenses Calculator” tool HERE.
- Enter all your “Known Upcoming Expenses” into the tool – include the annual expense of each line item.
- Enter your “# of Pay Periods Per Year” into the tool – enter “12” if paid monthly, “26” if paid every 2 weeks, “52” if paid weekly, and “24” if paid twice each month.
- You have now calculated the amount you need to save out of each paycheck to ensure all of your Known Upcoming Non-Monthly Expenses are covered.
- BONUS STEP: Set up an on-line savings account (I use Capital One 360 – formerly known as ING Direct) and make your savings automatic. In other words, you can set up automated transfers to your on-line savings account. This allows you to “set it and forget it” and KNOW you’re major known upcoming non-monthly expenses are covered!
AUTHOR’S NOTE: I am paid monthly. I have set up a monthly transfer to happen on the 6th day of the month from my regular bill-paying bank account to my Capital One 360 account. It may not be the most exciting thing in life, but it is INCREDIBLE to know I have eliminated “budget crushing expenses” from my life!