UFCU SPONSORED CONTENT — Do expenses like insurance premiums, taxes, annual memberships, or car repairs tend to catch you by surprise and throw off your budget? You aren’t alone. Budgeting for regular monthly expenses can be easier to account for because they happen consistently. Still, when you only pay for something once or twice a year, it can be challenging to budget for it. These three easy tips will help make planning and paying for irregular expenses a little easier.
Step 1: Identify Your Irregular Expenses
Look through your bills and statements over the past year or two and see if any patterns emerge. Next, make a list of all the expenses that come back year over year. Some will be fixed expenses–meaning they stay about the same amount–and some will fluctuate, like insurance premiums or car repairs. You may not know the exact cost to budget, but you’ll be able to get close by reviewing past expenses.
The most common irregular expenses are car costs (regular maintenance, repairs, inspection, and registration), clothing, entertainment, household repairs and maintenance, insurance premiums (health, dental, vision, auto, homeowner, renter’s, life, disability), birthday and holiday gifts, medical expenses, taxes, and tuition.
Step 2: Make Your Unexpected Expenses Expected in Your Budget
With your list of expenses from step one, you can now add them to your monthly budget and make saving for these a regular habit. There are a few ways you can do this. You can add one line item for each expense, and divide the yearly cost by 12 to get the monthly amount. Or, you can total all the expenses and divide that amount by 12. You should then either move these funds to your savings account or establish separate accounts for different purposes, like a vacation, gifts, etc. Whatever you decide, don’t leave the money in your checking account–most people find that if it stays in their checking account, it is more likely to be spent.
Many credit unions allow you to set up sub-accounts within one savings account or open a specific savings account for these expenses. Just remember to check the minimum balance requirement and fee schedule for any account you open.
Step 3: Talk it Out
If, despite your best efforts, you are unable to save enough to pay your periodic expenses on time, talk to a representative at that institution. Let them know you’d like to pay what you can and remain in good standing. Ask if you can lower any penalties by paying a portion now, or ask if you can set up a payment plan.
Charging things to your credit card when you cannot pay off the balance in full the next month is usually not wise. Still, it may be a good option if you will pay more in interest versus the late fees. If saving each month for irregular expenses becomes increasingly difficult, it is a good idea to examine your monthly budget to see what you can cut to free up cash.
If you’re looking for more helpful financial tips and tools to better plan, spend, save, and borrow, visit UFCU.org/PlanU.