I have a confession to make: I’m not going to save half of my income this month. Or any month until…. October.
OK, I still have hope for July, but that’s a big maybe.
How can I be so sure, months ahead of time, that I’m not going to hit my savings goals for most of the next few months?
The Dread Pirate Non-Monthly Expenses.
Call them planned spending, irregular expenses, whatever you want to call them, at the end of the day they’re big purchases that don’t happen every month. We’re talking everything from a big vacation to an annual insurance payment to Christmas gifts (because egad, the holiday spending struggle is real.)
I know my next few months are going to be super-spendy, because I’ve planned to knock out some major non-monthly expenses over the summer, from my annual hosting costs to a big vacation to out west for fun, meetups with other amazing bloggers and a family wedding. I’ve also got a certain dog’s annual insurance payment coming up in September, which brings us to October before the non-monthly expenses really die down.
Until Christmas, that is.
The nice thing, though, is that I’ve had a plan in place to cover these expenses all year – and there are some simple steps you can take to make sure these big one-time expenses are stress-free for you, too.
Map out your big expenses
I didn’t go high-tech on this part: I literally wrote out the months of the year and put notes about big upcoming expenses beside each month. These are the things you know – roughly – are going to happen, and when.
As you go through the list, think about
- Annual subscriptions
- Annual or quarterly payments (insurance, etc.)
- Vacations
- Healthcare purchases (glasses, etc.)
- Seasonal expenses (sports, team memberships, etc.)
- Holidays (gifts, travel)
- Dependent’s expenses (sure, I mean my expensive dog, but kids count too I guess)
- Business expenses
For me, I came up with 10 big expenses, tied to 6 months in the year (there was a bit of overlap making for some spendy months, clearly.) If you want an easy way to map yours out, make sure to grab the worksheet and outline your year of expenses!
Estimate the costs
Once you have that list, you can estimate how much each thing is going to cost you. If you’ve bought this thing before, it’ll be an easy estimate – plan for what you spent last time, and you should be within the right ballpark.
If it’s something you haven’t done before, like a vacation or a new pet’s routine vet bill, you can still make an educated guess! Google how much other people have spent on similar things, and if it’s something that involves multiple expenses (I’m looking at you, vacation) spend a bit of time planning how much you’ll spend on each part of it.
Plan your monthly savings
Now that you have a ballpark number for each of your monthly expenses, you can work on a savings plan to tackle them, without totally destroying your monthly budget. I remember saving up for running gear when I was a new grad, because a $200 pair of running shoes would have absolutely sunk my monthly budget.
We’re all about not sinking budgets here, right? Right.
But first things first: take a look at your planned expenses. Are some of them expenses you could handle within your regular monthly budget, if you just adjusted a few things? Maybe it’s a wedding gift, but the wedding is in town, so your expenses are minimal and you can totally swing it, no extra savings required. Those ones, you have full permission to not worry about.
Let’s talk about the bigger ones though – the ones that would 100% sink your budget and have you on a steady diet of ramen noodles if you had to also feed yourself that month. (Yo, you need to feed yourself, and as delicious as ramen noodles can be, don’t do it!)
For those expenses, you need a plan. Take the estimated cost, and divide it by the number of months between right now and when that expense is going to show up in your spending. That’s your new monthly savings goal, to make sure that expense is 100% covered by the time it happens.
Once you’ve done that for every expense, you’ll have a ballpark idea of how much you need to put away each month between now and those expenses happening.
Pick a way to keep track of your savings for these expenses
I know some people have serious reservations about setting up multiple savings accounts, which I totally get (and will talk more about in another post, trust me.) On the other hand, just leaving these savings in your chequing account is a recipe for spending them on something else. So here are three options you can consider to help make sure you actually save the savings you’re earmarking for non-monthly expenses.
Create a separate savings account for each expense.
Putting aside any reservations about opening a zillion accounts, if you have a few big expenses on your list (like, less than 5) this could be a great strategy. You could name each account, too, to help you remember why you’re saving – it’s way more motivating than an account number, I swear.
I did this for my new-bed fund, since my god mattresses are pricey. I’ve been putting away a set amount every month into it, and when I’m ready to buy a bed, the money will be there waiting for me.
Create an account specifically for non-monthly expenses, and group them together.
If you have way too many expenses for them to each get their own accounts, consider separating your savings for these purposes into a dedicated account. That way they’re safe from any “Oops!” moments of overspending in your chequing account, and don’t get confused with your other goals (like your emergency fund goal!)
Also, if you’re on Team Don’t Want a Lot Of Accounts, you’re only adding one more savings account to your list. One is a totally manageable number, right?
Bump up your contributions to an existing account (that you don’t touch!)
Maybe it’s your emergency fund, or maybe it’s an existing vacation fund that you throw your gift-specific saving into as well, but either way, you bump up your contributions to this account to add in the savings for your planned expenses.
While this isn’t necessarily my preferred approach, when I stopped to think about it I realized I do this too. I throw my dog’s annual insurance payment savings into his emergency fund account, because it makes sense to me to keep them together! So there you have it. Combining approaches is 100% allowed and might make perfect sense for you.
That’s really all there is to it – map out your non-monthly expenses for the year, build a savings plan to tackle them, and make sure you don’t spend the savings on something else!
I’d love to hear what other strategies you guys use to handle big, irregular expenses! Let me know in the comments, especially if you’ve figured out another amazing system to tackle them.
Great post and these are all really important things to think about and develop a system for! For me, I have three accounts:
1. Checking account used for everyday expenses/spending, including regular monthly bills, groceries, discretionary spending
2. Checking account used for non-regular expenses (insurance payments, travel costs, etc)
3. Savings account used as my emergency fund
I contribute a portion of each paycheck to all three accounts, and I track the current and projected balances using a spreadsheet. As soon as I know of an “irregular” expense coming up, I plug it into my sheet which gives me a snapshot of how much will be in my account at any given moment. This really helps me to adjust as needed, with time to plan accordingly.
For example, I’m going to Europe in August. I’ve set a high-level budget for that trip, and entered the estimated spending amount on my spreadsheet. I plan to make withdrawals at the beginning of the trip. so I have a line item showing a withdrawal from my account on that date in August. I also have line items for each deposit for upcoming paychecks, so that I can safely and accurately project my balance and see that I have enough to cover these planned expenses.
It might sound complicated, but really it’s not. This system works really well for me!
That’s such a great idea Andrew – I love the idea of being able to forecast how much will be in the account on a given day! I totally use that system at work to see how many vacation days I’ll have accrued by a certain date, and it makes perfect sense when it comes to savings too!
We look at last year’s expenses and divide by 12, so that each month, we are saving for taxes, gifts, vacation, home repair, insurance.
The line item in the budget is Sinking fund 1, 2, 3 etc.
The savings acct is in a different bank, making it harder to “transfer” (out of site, out if mind).
The other-bank thing is SO helpful! When EQ Bank came out with their crazy high promotional interest rates I switched my house downpayment savings and emergency fund over to them, since the rationale is that I’m not pulling from those accounts on a regular basis anyways, so I figured the hassle of accessing them was a net positive, haha. It’s been great – not that I actually touched those two accounts before, lol, but now I super-know I won’t!
I am so bad at having subaccounts or dedicated funds earmarked for things like this. I try so hard to cash flow everything and it adds so much extra stress to wedding season and Christmas to do that. I do put extra into my savings anticipating big events, but if I were more precise like this, I would probably be A LOT happier. Thanks for the worksheet!
Awww you’re welcome Penny! I hope it’s useful! And I tried to cashflow Christmas this year. Let’s just put it this way – by the end of the month I had FULLY abandoned my tracking spreadsheet and was basically like, both eyes closed, groping through the darkness, hoping for the light at the end of the spendy, spendy tunnel in January.
I mean, uh, a really well-planned spending month? Lol it was my first month of really paying attention to money at Christmas, so my plan is to handle it way better this year.
I handle irregular expenses by realizing they are actually regular! I budget one twelfth of last year’s annual spending each month and let it roll over to account for the fact that some months are spendier than others. It’s been working great. This also means I can save a consistent amount each month too.
That is such a smart approach Leigh! Honestly I had never even heard of that way of handling things until multiple smart humans like yourself pointed it out in the comments, so thank you! It definitely feels like a way more streamlined way of handling things, haha.
Awesome post, Desirae! I do the exact same thing! Seriously, it’s really easy and I just throw mine into multiple online savings accounts. When the expense comes up I put it on the credit card or pay for it from our household checking account. Then just take the funds out of savings to pay my card off or my “house” back. You’re right, it really doesn’t matter where it’s saved, as long as it works for you.
Thanks Latoya! And I handle it the exact same way – I always use my credit card and pay it off when I get home from the relevant account, haha. Might as well get the points / cashback if I’m guaranteed to pay it off anyways!
This is exactly what I do, and it works out soooo great. It feels amazing to never be stressed anymore about paying my car insurance or buying Christmas gifts.
Exactly! I can’t wait for the dog’s annual insurance payment to be absolutely no sweat – that, and vacation, will be the two things I’ve specifically saved up for using this strategy, and I’m pretty sure I’m going to feel like a total boss. (Or nothing at all, lol, but that’s preferable than panic and stress for sure!)
I know a lot of banks offer free “e-savings” accounts where you can only access the money by transferring to a cheque account. You can label them on your online banking and set up an autotransfer every paycheque. My wife Sarah and I used to do this…until we got into the wonderful world of home ownership. Suddenly the number of accounts we’d need to feel comfortable skyrocketed. The budget template we’ve been using for years separates our budget line items by monthly contribution (for Sarah’s pay) and weekly contribution (for mine). It was a beast to set up when I designed it (luckily I LOVE macros!) but now it is automated while keeping the control in our hands.
Ahhh macros are on my must-learn list! I am baffled that I got a business degree with my pitiful (but growing!) Excel skills, for real. That’s what happens when you study marketing, I guess, lol. I’m super happy you built a tool that works for you!
YNAB. YNAB. YNAB.
I used to have trouble with these expenses in the past as I never really knew how to save with it. Now with YNAB you treat it exactly like a monthly expense. For instance, if I estimate I’ll spend $1200 on Christmas, YNAB will train you to save $100 in that category each month and the balance will carryover each month. I do this for ALL annual expenses – even my $25 Evernote premium subscription. I’ll budget $2.08 each month for it 🙂
It’s only been like…. 10 months that I’ve been telling you I’ll try YNAB, right? Lmao someday Vic, I swear! I know it’s amazing! And I love that you use it for *literally* everything 🙂
This is craziness, Desirae. Do you know why? Literally just last night, I told my husband we could not buy one single thing for the rest of this month because we’re building a deck on our house this weekend (well, not we, just him. I supervise). It’s a good thing we already bought groceries, because otherwise, we would have been on that one-month ramen noodle diet haha.
Had I read this post first, I probably would have chilled out and not said anything. I actually do have a monthly budget item that accrues for Christmas gifts, and a separate one for miscellaneous gifts throughout the year, but that’s it. Even knowing that we’d be taking this project on this year, I hadn’t earmarked any dollars specifically for it. Lesson learned – from now on, I will be following this advice!
Awwww Kate! Thank you! And I mean, even given this system, there have for sure been months where I pull the “but we’re not spending ANYTHING ELSE” move. Or at least the “we’re not getting ANY more fancy beer” move. Plus, having lived through a few home reno projects as an adult, I know all too well how things like deck building feel, including on your wallet.
Oh actually, this is a great story – when my boyfriend was redoing his kitchen, we were trying to keep the project under $1000 (he got free cabinets from his parents since they redid their kitchen.) So he sent me to Lowes while he and his father were working, to pick up a new range fan. His father, in his infinite wisdom, said we shouldn’t buy anything with more than 4 sones (the sound rating I had never heard of and still don’t understand.) So I’m there in Lowes, in the kitchen aisle, on the phone with my boyfriend, and I’m all “Well, we can get the $350 range fan with 3 sones, ORRRRRR the $50 with 7 sones. How loud could it be, really?”
Really. Effing. Loud. That was the right answer. It was so loud that we *never* used it, until his saint parents got rid of their old one and we stole that, too. Anyways, that was my very long-winded way of saying that I feel you on the home-reno-budget thing.
Love this! And reading this makes me realize that we sort of *are* actually budgeters because we set a yearly budget, even if we don’t follow it month to month. But in it, we do plan for the annual expenses that are easy to forget otherwise. Oh, and we totally plan to have like 5000 accounts once we get to retirement so we don’t forget the big stuff like property taxes (which will no longer be escrowed once the house is paid off) and insurance (which we currently pay monthly but will probably pay annually once our cashflow is different). 🙂
Yessss multiple accounts is like my favourite thing ever! You’ll love it, for real – I’m actually planning to do a post about just how incredibly great it is and how quickly it changes how you see your money (which to be honest is aimed at a different audience than you guys, because I know you’re already fantastic at planning how money gets spent, regardless of which account it’s in!)
Also, I love that this post is getting reactions like I’ve jumped out from behind a tree, done some silly finger guns and been like “SURPRISE! You budget!” If only because that is totally a stupid thing I would do in real life, to a chorus of eye rolls, lol. Someday, no joke, I am going to videotape myself doing this. Maybe it’ll be my retirement gift to you guys! (Seriously though, when it gets closer to The Day, I am going to pester you for a physical address to send you a card. It is a big deal – attention must be paid!)
I can’t wait to try this! Right now, we’re at a place where I’m proud of us for having (and maintaining) a savings account, which right now is both our emergency fund and anything-else-we-need-to-save-for fund. Our extra money is all getting tossed at debt, but once we’re done, I can’t wait to have multiple accounts. I hear a vacation account calling my name 😉
That is so awesome Pia! And soooo many high fives on the debt repayment! When it is done with, you will have *totally* earned that vacation savings account 😉