Have you ever prepared a budget and faithfully followed it only to have it crushed in the middle of the month because of an expense you forgot about? Does Christmas seem to creep up on you every year? Have you had to suddenly replace the tires on your car? Chances are, you answered yes to at least one of these questions.
These budget busters are called “Known, Upcoming Non-Monthly Expenses.” The reason these expenses get forgotten is because they are non-monthly so they tend to be pushed to the back of the mind until the bill suddenly comes in the mail. But when they do finally appear, they can create a financial emergency causing you to either break your budget or go into debt.
Think about what non-monthly expenses you know will come up throughout the year. Here are a couple of common expenses that people have:
- Car tires need to be replaced
- Heating & Air goes out
- Life insurance premium
- Property taxes
- Health Insurance deductible
Once you have these expenses listed out, you can plan to save monthly for them in your regular budget. Check out our Known, Upcoming Non-Monthly Expenses Calculator to do this with ease. Below is an example of the calculator in action:
By knowing what these expenses are and saving for them monthly, you’ll no longer have to “come up” with the money when the bill arrives. You will simply be able to pay the bill in cash. A cool feature of this tool is that not only does it calculate what you would need to save per month, but it also calculates the amount based on different pay frequencies. If you get paid twice per month, you would need to save $289.58 out of each paycheck. For a bi-weekly frequency, you would save $267.31. Regardless of how often you get paid, you can save accordingly and have the money available when you need it.
Tips for using the tool:
- Be sure to recalculate your monthly savings number at least once per year.
- Don’t forget more long-term expenses such as college, weddings, vehicle replacement, and major home renovations.
- Make your savings for these expenses AUTOMATIC by establishing an auto-draft.
Want more tips like this one? Subscribe to the Monday Money Tip Podcast HERE.
What if I told you that you don’t have to go into debt Christmas shopping this year? That you can buy your gifts IN CASH and can avoid those dreaded credit card bills in January? Can you guess how you accomplish this? That’s right, a budget.
Christmas is a known, upcoming, non-monthly expense. That means that we know that Christmas comes on the same day every, single year and we should plan for it accordingly! In the Sangl household, we do this by saving a little bit for Christmas each month.
First, we decide how much we want to spend on Christmas altogether. Then, we create a list of every person or organization that we’re planning on buying a gift for and decide how much we plan to spend on each person. All that’s left to do is make that budget equal EXACTLY ZERO. Once you have your plan put together, you can do your Christmas shopping guilt-free!
You can download a copy of one of our FREE BUDGET TOOLS HERE.
For more tips on how to have a debt-free Christmas, check out our full episode of the Monday Money Tip Podcast HERE.
For more information on how to create a Christmas Mini-Budget, check out this related blog post.