Is your budget sometimes caught off guard?

spending too muchHow do you manage those annual, twice a year, or other non-monthly expenses? How can you convert these non-recurring expenses into a monthly amount so your budget can handle them each month … and THEN MORE IMPORTANTLY … have the money already set aside to pay these “out of the blue” bills?

Of course, these aren’t really unexpected bills – simply bills often forgot about until they arrive – and then they disrupt the budget for that month or more, or worse – end up on credit cards. There’s a better way. Use a savings account – a new one works better so it is specifically dedicated to only these types of bills and other needs you have that don’t occur every month.

Here’s a snapshot of an excel spreadsheet with different items as examples of things you could save for monthly, and then use the money once or twice a year. Your actual column headings would likely be different, customized to your situation.

Monthlyy Worksheet

You then build in a row for the annual amounts (sum of twice a year, or 4 times a year billings, etc.). The next row is what that annual expense is monthly (divide the annual row numbers by 12). The first time you won’t have beginning balances, but the following years you probably will.

Then, each month, simply track in each category how much you deposited and how much you withdraw from each category. You should have money deposited into each column each month, and the withdrawals are only when the bill arrives or travel or Christmas time comes for example. The Total column on the right should match up with your savings account balance as you go along. The Column Totals column simply sums up the whole column and keeps you informed what the balance in each category is as you go along.

The advantage of such a tracking system is that many times paying once a year for example, is less expensive than the company billing you monthly. In other words, if you’re billed extra for the privilege of paying monthly, then don’t pay it monthly and be charged extra. Instead, pay annually for example, so you avoid that extra charge.

If you don’t have spreadsheet software like Microsoft Excel, simply Google “online spreadsheet” and select the program option that works for you.

Moral of the story: once you have ALL your bills paid for each month, including these non-monthly-hard-to-plan-for-until-now bills, as well as other savings needs for your goals like retirement, etc. … then it really doesn’t matter how you spend the rest! You do this by converting those awkward bills into monthly sums and save that amount each month.

 

About Larry Frank, Sr.

Larry R Frank Sr., MBA, CFP®, is an experienced financial advisor and a published author on Retirement Planning Research. Have a financial question? Click Here to Ask Larry

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