This post is by our regular Wednesday contributor, Erin.
Does it ever seem like an expense just pops up out of nowhere, even though you technically should have known about it?
I think it’s happened to all of us at some point or another, especially if we’re particularly busy and don’t realize how fast time is flying by.
That’s why I’m a big fan of taking larger expected expenses into consideration at the beginning of the year, and estimating when they’re due (so you can budget for it appropriately). But that takes some commitment and organization, which a lot of you might not have the time for.
Hopefully this will help, as I’ll be giving you 5 expenses you should think about budgeting for today. If you haven’t thought about them, now is the time to start!
1) Car Expenses: Insurance, Inspection, Registration, Property Tax
I have to admit, this totally crept up on me this year, and my car is due for all of the above this month. Joy!
I have a buffer in place for these things, so it’s not a big deal to me, but it could have been. All together, I’ll likely be spending around $200 or so, and that’s provided my car doesn’t need any work to pass inspection.
Factoring in property tax is a little new for me as I didn’t have to pay for it in NY (except registration was a lot more there). Thankfully, I have an older car, so this amounts to maybe $20. I’ve heard of others paying as much as $300 for a newer car.
I also choose to pay my car insurance premium in full, since I avoid the pesky installment fees that way, and I also don’t have to worry about it for another 6 months.
Additionally, I think it’s wise to factor in routine car maintenance. If you know your car needs an oil change roughly every 3 months, then make sure you budget for it every 3 months! It’s as simple as that.
2) Major Celebrations
For whatever reason, 80% of my family decided to be born in the fall (totally their fault). Coupled with the holidays, it makes for a rather expensive time. From July on, there is at least one birthday per month in my immediate family.
Since they’re so clustered together, there’s really no excuse for not planning accordingly.
You can do the same for weddings, anniversaries, and showers. Most of these events are scheduled out far enough in advance that you can start saving for them each month.
Let’s not even talk about holidays. Mother’s Day is around the corner, and Father’s Day is one month away. There is absolutely no reason to go into debt to afford presents for holidays when they occur every year at the same time.
3) Routine Checkups
This mostly applies to annual healthcare checkups, which you shouldn’t be skimping on – your health matters!
If you don’t have dental or optical insurance, or if you have high copays for doctors and specialists, you should save ahead of time to be able to afford a visit.
Preventative care will always end up saving you money. Case in point – I avoided going to the dentist for a little because I lacked insurance. Then my wisdom tooth started killing me one day. I went in for an emergency extraction, and came out with a $250 bill.
That was manageable, but it could have been worse. Choose one month to go visit all the appropriate healthcare professionals, and save enough beforehand so you aren’t tempted to make excuses.
4) Quarterly Taxes
If you’re a freelancer (or side hustler), that is.
I have to mention this one as tax day just came and went. I’m sure there were a few of you out there who were left with a tax bill bigger than they anticipated.
I was extremely relieved I only ended up owing the state $40, but I had already earmarked a large portion of my income for taxes just in case.
Taxes can be a nasty surprise, and they don’t have to be. If you’re keeping up with your bookkeeping throughout the year, you should be able to estimate how much you’ll owe each quarter. Plus, tax payments are due at set points throughout the year, so you can’t say you didn’t know!
5) Pet Emergencies
I’m trying not to go into emergency fund territory here – I’m actually trying to do the opposite. Many of us have emergency funds for things that are truly emergencies, but I don’t think any of the above qualify since they’re technically all expected expenses.
In the same vein, pet emergencies should be expected. I don’t like to say that, but vet bills are something that comes with the territory when you choose to make a furry addition to your family.
Similar to not skimping on your health, the last thing you want to do when your pet isn’t acting properly is to panic about not being able to afford the cost of treatment.
Unfortunately, a lot of times you could be looking at the cost of ongoing treatment or medication as well. Vet bills and medicine add up, so it’s important to start saving as soon as you adopt.
So, How Do We Budget in Advance?
There are two ways you can go about this, and one is probably easier than the other.
I remember back when I used to live with my parents – my mom would always update the calendar on January 1st. She marked down everyone’s birthday, anniversary, and anything else that had been planned already.
You can take a similar approach with your budget, if you keep one.
Figure out when these expected expenses will be due and plot them on a calendar or within your budget spreadsheet. This way, you can start budgeting in savings each month leading up to them.
A common example is saving for Christmas throughout the year. You have 12 months to save as much as you need, so if you determine your Christmas budget to be $1,000, then save $83 each month to meet that goal.
The other approach you can take is to completely automate your savings. Open up a savings account with an institution that allows you to have multiple savings accounts, and go crazy.
Open a savings account for all of your larger, planned expenses. Have a car maintenance fun, a pet emergency fund, a holiday fund, a vacation fund – you get the idea!
I like having separate savings funds. It clearly earmarks your money for a specific purpose so you’re not as tempted to spend it, and you can quickly see where you stand and what you can afford.
Plus, you can set up automatic transfers from your checking account to each savings account, making it super easy to work toward your goals.
_______________________
Don’t get caught making the mistake of not budgeting for certain things in advance. Many “unexpected” expenses can be budgeted for, or at least anticipated. It goes without saying that cars will need maintenance, pets will need care, and gifts will need to be purchased for special occasions.
Have the funds in reserve for these moments, and you won’t have to stress when they sneak up on you.
What expenses do you budget in advance for? Have any expenses ever caught you by surprise? Do you like having separate savings accounts or automatic transfers?
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We budget in advance for all these. I just set aside a certain amount of money each check that will languish in our checking account until called upon. Specifically related to healthcare expenses, we are on a high deductible plan, do u save to cover the entire deductible, even though if we are all healthy, we’d never need it. What if we did?
Planning for car expenses and health care costs are huge. It’s not sexy and people generally don’t do it, but this tip alone can put you ahead in your finances. You won’t feel scared and fearful if something — err when something — happens.
We budget for a lot of these things. We have multiple savings accounts we move cash to each month so all we need to do is transfer the cash over when it comes time to need it. I hate dealing with #4, but it feels good knowing we won’t be surprised and can just move the cash over to write the check.
All of the stuff you’ve mentioned here aside from birthday parties comes out of my emergency fund. I definitely plan for quarterly taxes- I have to pay in about a third of what I make!
I budget in advance with a miscellaneous buffer. Even though it’s not targeted saving, it’s there for me when I need it. Just raided it for my move :)
I have an online bank account that has 8 different subsections. Car, home repair, taxes, etc. We’ve gotten to be really good at guessing how much needs to go into each one to keep us going without hiccups. Since I have fairly even paychecks, I prefer to have fairly even “expenditures.” In a freelance situation I would treat this totally differently though.
Budgeting ahead for expenses that are expected throughout the year is less stressful for me and I’m starting to do it more. I recently paid my car insurance for 6 months and I’m going to start saving up for Christmas in another month or so. Since there are so many birthdays in my family in January, the holiday season just seems to drain me financially and I want to be prepared this year.
I feel like major celebrations are always so overlooked! Birthdays and Christmas aren’t a surprise! It shouldn’t come out of the emergency fund. Some banks even have special “Christmas Savings” accounts for this type of thing.
I like that you included car expenses…something to add to that list
are any “routine” maintenance items that may be coming up. My van is
approaching 40K miles, so I know I better start saving up for brakes.
You can look at your tires as well and make a pretty good guess as to
whether you should be saving for a new set.
I have a bunch of these expenses and divide them up per month, then have it automatically deducted into buckets in my capitol one 360 account so it’s away from my main checking account.
These are all great things to budget for! Pet emergencies are an area that we need to work on. We have been lucky in this area, but both of our dogs are getting quite old so this is a good area to prepare for.
indebtedmom That’s awesome, Kirsten, and setting aside a portion of your paycheck for each is a good way to go about it. Healthcare (any any insurance) deductibles can be tricky to work with. You never want to leave yourself vulnerable, but it can feel like a “waste” to save *just in case.*
Financegirl Exactly, Natalie! Car repairs can really put a cramp in your budget, and it’s something most of us all deal with at some point or another. There’s no reason not to plan ahead for it.
FrugalRules I’m very quickly learning to hate #4 ;). I actually procrastinated opening a business account until recently, but I’m so glad I have. I set up automatic transfers to a separate tax savings account and it’s all taken care of for when June rolls around!
Holly at ClubThrifty Quarterly taxes are really a pain to deal with, and since they’re such a big chunk of money, it definitely pays to plan for them! A $2,000+ bill is not a nice surprise.
brokeandbeau That’s pretty much what I’ve done most of my life, but I have such a hard time parting from my money that having targeted savings accounts mentally makes it easier for me. Silly, I know!
Hannah UnplannedFinance I love how organized you are! There are so many little things we can save for, having multiple savings accounts makes it easier to keep track. I’m grateful my fiance’s the “stable” side of our income. Budgeting with just freelance income would be more difficult.
Chonce I hear you on that! It’s crazy – I pretty much don’t get a break until January for the second half of the year. It stinks to have so many birthdays in the family around Christmas, but that’s why it pays to plan!
SimplySave Yes, exactly! My mom actually told me about the Christmas funds a while ago, and I had no clue they ever existed. I know time passes by quickly and things can sneak up on us, but if you automate your savings, it’ll be taken care of.
DebtChronicles Totally agree, Travis! We just replaced all four tires on our car, so now I know we’re good to go for another few years. Getting yearly inspections helps with knowing when your car is due for what, too (provided you have a helpful and honest mechanic).
Beachbudget Awesome system to have, Tonya! I love how easy it is to set up separate savings in a 360 account. I wish I had opened one sooner.
SenseofCents We’ve also been quite lucky so far with our two cats, but one just turned 7, so I know we’ll be safer if we start putting more money into that fund. We had some unfortunate things pop up in the past with pets, which is why I had to add that to the list!
Lauren was born in November and Taylor in December so I had my girls during the busiest and most expensive time of the year – I don’t know what I was thinking! :) Yes, unexpected but not emergency expenses pop up all the time. I am guilty of being surprised when I get my car registration notification in the mail along with the requirement for a smog test and so forth. It’s why I do build in some pad in my monthly budget for those things I forgot or can’t always anticipate because there is always something.
I’m lucky that I don’t need a car (yet), so I thankfully don’t need to budget for car stuff. But if we ever have to move to a different area, I’m sure I’ll be needing one. I like your idea of paying the insurance premium in full. These are all great suggestions to keep in mind before I even think about getting a car. My friends think I’m so weird that I already started saving for a car (that I may never need), but I’d rather be prepared :)
ShannonRyan Making sure there’s a buffer in your monthly budget is also a great way to prepare! Car registrations and inspection notices are certainly sneaky. In NY, the registration lasted 2 years, so I have to get used to it being yearly!
Anum Not having a car can be so much easier! Sometimes I wish we lived and worked in the city so we wouldn’t need one. It’s super smart to already be saving for a car. If you need to, you can always transfer the savings toward something else! It’s similar to saving for a wedding even if you’re not engaged. If you’re fairly certain it’ll happen, it doesn’t hurt.
Great article — there are things we always forget to budget! Even items for pets (heart guard, vet bills, etc)
I’m the same way with birthdays, only in February and March. I think it’s 90% of my family and all of the birthday parties we go to are in those two months…which kind of stinks, because it doesn’t give us much time to recover from the costs of Christmas. Definitely necessary to budget for those birthday gift expenses that hit us all at once!
moneymillennial Thanks, glad you liked it!
Christina@EmbracingSimple Yep, I can definitely relate, as my mom and grandma were born in February, so I only get a month reprieve of all the gift buying! It’s just better to plan ahead.
Hey Erin! Such a simple yet very powerful post and tip here.. I like your idea on saving with specific targets in place.. I’ve recently had to have some wisdom teeth taken out and although had enough in my emergency fund, which meant I was fine I realised the importance of having $$ put aside for this..
I’ve got holiday, car/insurance, health, dating/wedding (even though I’m single atm ha), education (for future qualifications), which I’ve found will cover most major areas of life..
The bonus of this is that if I don’t spend all of my allocated amounts each year there’s then a surplus..
I definitely enjoy having separate accounts and like the sound of your process too!
mycareercrusade Ack, I’m sorry to hear about the wisdom teeth. It’s not a fun procedure at all! It’s always beneficial to be saving, as you never know when the money might come in handy. I think it’s a smart idea to set aside money for dates and weddings even when you’re single. Money and relationships tend to be a tricky field to navigate, and having the money set aside makes it less stressful.
We have little envelopes for all of that stuff. Homeschooling curriculum is the one that gets us if we’re not watching out for it. But like the others, we KNOW it comes in September! Duh! We’re getting better, though. :-)
Laurie TheFrugalFarmer Envelopes work well, too! I’m sure back to school supplies come as a surprise to many parents, as summer always goes by so fast. That’s a good one to think about!
We finally started a sub-account specifically for car insurance. I was tired of getting slammed in August each year. Especially since we pay the full year at a time.
We also put $100 into a car fund each month. Ideally, this will go toward a new car one day. For now, it covers us in case of emergency. It certainly helped when we unexpectedly needed a car in September. That was $3,500 that didn’t come out of savings or the emergency fund.
I used to get hit every spring with life insurance, taxes, and car insurance. Not sure why we signed up for any insurance policies to renew during tax time, but it is what it is. It’s so much easier to put back a little every month than to try and come up with it all at once.
AbigailP It can definitely be a lot to deal with insurance premiums all at once! I’m thankful ours went down when we moved, so they’re a bit easier to manage now. Having a car fund for emergencies/a future car is a great move.
Eyesonthedollar Ouch, I can’t imagine having to pay all that at once! It’s certainly a lot easier to put a little away at a time so you’re not slammed with too many one-time expenses.
Erin @ Journey to Saving mycareercrusade Arghh the wisdom teeth being taken out was actually okay and didn’t end up costing too much! :)
Yes agreed on the money side of things, should be an interesting one, we’ll see how it goes