My wife and I have been doing a monthly budget for 10+ years. But I still recall in the early days how those irregular expenses would mess us up, and I remember wondering should I add occasional expenses to my budget?
The answer is yes, but here’s what I’ve learned about doing it the right way:
You should budget for all expenses including those which happen quarterly, annually, or even more irregularly than that. Either use an app that reminds you when to budget for these expenses, or divide the total cost by the number of months away and set that amount aside in savings each month until due.
But there’s a lot more to know about keeping up with irregular and occasional expenses.
So in this article, we’re diving in deep into the world of budgeting things that don’t happen every month like mortgage, utilities, and groceries. I’m talking about stuff like annual car registration or even stuff like haircuts that might happen every 6-8 weeks.
So if you’ve been wondering should I add occasional expenses to my budget, or aren’t sure how to do it, let’s get started!
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What is an occasional or irregular expense?
Occasional or irregular expenses are ANY expense you have that doesn’t get paid every month.
After all, most of us who do a budget, do one monthly. So irregular expenses often throw us for a loop since they aren’t on our radar each month like rent/mortgage, utilities, cell phone, internet, etc.
So what would these occasional or irregular expenses be?
Check out these occasional expenses examples:
|Type of Expense||How Often I Pay It|
|Auto Registration||Once a Year|
|Trash Pickup||Every 3 Months|
|Christmas Spending||Once a Year|
|Haircuts||Every 6-8 Weeks|
|Back to School Spending||Once a Year|
|Car Oil Changes||Every 3000-6000 miles|
But for you and your budget, you might not have all of these things, or you might have other things I don’t have.
There are also really irregular expenses we all have like new tires and brakes for your car(s) which you might need every few years.
Because these are still known expenses, they really shouldn’t constitute an emergency. So if you have an emergency fund, make sure to NOT use it for stuff like that.
We just need to be smart about how we plan for these types of expenses, which we’ll get into next.
Don’t have a budget going yet? There’s a lot of ways to budget, ranging from an Excel spreadsheet like I use, to good ole’ fashioned pen and paper. But I also have a recent article which breaks down the 9 best budgeting apps.
While that post is geared towards couples, these apps all work great for singles too. Many are free too. But it’s a great way to take your finances on the go with easy access from your smartphone.
Just click the link to read it on my site.
How do you budget occasional or irregular expenses?
In short, we need a system, both to remind us ahead of time when to budget, and a system to remind us when it’s time to pay them.
Once you have that system in place, you’ll never again find yourself driving with an expired registration dodging police cars in the hopes of avoiding a ticket (been there, done that).
So above, we got into what the most common irregular expenses are. Things like auto repairs, new tires, annual auto registration, oil changes, just to name a few.
So as I mentioned, we need to have a system in place to organize and plan for these expenses so they don’t sneak up on us.
I don’t want to be driving on bald tires, but I also don’t want to reach for the credit card due to my poor planning either. After all, getting next-level on our budgeting is about getting ahead financially. And adding to our debts shouldn’t be part of that plan.
My preferred system of staying organized (in every way; not just budgeting) is using a web-based organizer (also available as an app) called GQueues (click to learn more on their site).
This program is an online to-do list. It even connects with my Google calendar, can send me email reminders or notifications and much more.
Using GQueues I set up folders for each calendar month.
Then within each month, I put reminders of upcoming expenses (allowing at least 2-4 weeks or more lead time, so you have time to budget before they are due).
You can also set tasks to be recurring too. That way, things like annual auto registration automatically pop up at the same time every year.
I also have a complete GQueues review and tutorial that walks you through every feature and how to use it. So just click that link to see more on my site.
Did I mention it’s totally free for desktop and something like just 5 bucks a year for the mobile app?
How do you budget annual expenses?
Whatever system you use, you have to have something to help you remember to budget for these irregular expenses as they come up. But even just entries in your Google calendar work too and are certainly better than nothing.
But another method that works great for annual expenses is to annualize the cost of all these things.
By that, I mean figuring out how much you think you’ll spend over the next 12 months. Next, simply divide that number by 12. Then, each month transfer that amount in savings.
Later, when the bill is due, just transfer the money back into checking and pay it.
I do this every year for our Christmas holiday spending and it’s a lifesaver! Every year the holidays used to sneak up on us. Between spending on our kids, holiday parties, fancy holiday meals, and co-worker gifts, it was really easy to go into January much deeper in debt.
All because we didn’t have a plan.
I go into much greater detail on how to do this for holiday spending in a recent article. What really surprised me about starting to save for the holidays beginning in January was how just a small amount of money each month can easily give us $1,000 to spend each Christmas and no debt whatsoever.
Just click that link to read it on my site.
What happens if you forget to budget for an irregular expense?
We’ve all had it happen where some expense we knew about (but forgot about) sneaks up on us.
When that happens some of us bury our head in the sand and avoid it. Later we pay it, but often with late fees or penalties attached.
Yet others may just reach for a credit card and pay for it that way.
The problem with that is it feels like you paid it, but you really haven’t. No, you just moved it from one account to another. Except now you’re incurring interest. When you do eventually pay it, you end up paying a lot more than you owed originally.
The average US household owes $8,195 in credit card debt. On average, while most won’t pay it off in full and not continue to use it, it takes those families an average of 13 months to pay that off. This, according to CreditCards.com.
Some states fare worse than others and overall southern states are trending the worst.
But forgetting to budget irregular or occasional expenses can just add to that debt and will take you more than a year to pay off. With the average American paying an average of 19.24% in credit card interest (according to WalletHub), you can easily find yourself paying hundreds or thousands of dollars in interest over a few years.
All because we didn’t plan for occasional expenses properly.
Is an unplanned expense an emergency or an irregular expense?
No, is the short answer.
If you know it’s coming (forgetting is not the same thing as being a complete surprise), it’s NOT an emergency.
Once you get your budget and debts under control, the next step towards financial success and freedom is having an emergency fund set up.
This is a savings account that contains 3-6 months of your household expenses that you only use for emergencies.
What is a true emergency?
- Air conditioner breaks
- You get into a car wreck and have to pay a deductible
- Your house is damaged and you have to pay the deductible
- You have a large unexpected medical bill
There are other things that constitute an emergency, but you get the idea.
So irregular or occasional expenses aren’t an emergency because we knew (or should have known) they were coming. Save the emergency fund for true emergencies and you’ll breathe a sigh of relief knowing that your household is protected no matter what happens.
I go into great detail about how to set up an emergency fund in a recent article. Don’t worry, I answer all the top questions including how to figure out if you need 3 or 6 months worth. But I also get into how to calculate true expenses, which is not the same as 3-6 months of income.
Just click the link to read that post on my site.
How do you budget for future one-time expenses?
Future expenses are another type of irregular expense.
But unlike occasional expenses which might crop up quarterly or yearly, here, I’m talking about one-time expenses you can predict but are still aways off.
Things like the following:
- New tires or brakes for a car
- A new roof on your house
- Replacing your home’s HVAC system
As I mentioned in the section above, these aren’t emergencies since we can predict when we’ll have to buy these things.
We know, for instance, a roof on a house typically lasts anywhere from 15-20 years. So if your house is 10 years old and still has the original roof, I would have a plan to replace that within 8 years or so.
How would I do that?
Just like with the annualized expenses we talked about above, I would estimate the cost. For a new roof, for instance, the national average is $7,211 (according to HomeGuide). If I want to have that amount of money within 8 years, I simply divide $7,211 by 96 (8 years of 12 months).
So the amount of money I need to set aside each month into a long-term savings account to cover that expense in 8 years is $75. Even if I’m off a little bit, you’ll still have almost all of the money on-hand ready to use with no credit cards or loans needed.
What’s key to keeping everything organized is having multiple bank accounts.
I have a recent article which breaks down exactly why my family uses 5 different bank account and how that makes budgeting for stuff like this a breeze. You’ll be amazed how much easier your life is and how much less stress and money fights happen with just a little bit of organization.
Just click that link to read it on my site.
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Did I cover everything you wanted to know about whether and how to add occasional or irregular expenses to your budget?
In this article, we took an in-depth look into the world of irregular expenses and how that works with budgeting.
After all, while a monthly budget is a great thing, expenses you pay quarterly or annually can sneak up on you and wreck the budget for that month.
So today, we took the mystery out of how to do that successfully. We also discussed what is and isn’t an irregular expense. Ultimately, though, we answered the question of “should I add occasional expenses to my budget?” with a definite yes.
More importantly, we showed you how to do it in the best way possible.
If you need help budgeting, make sure and grab a copy of my FREE BUDGET SPREADSHEET. It’s fully customizable and completely free. The budget is your 1st step in learning how to get ahead financially, so today is a great day to get started!