When I was using a Google Sheets spreadsheet to track our purchases, I found that “one time” expenses were always popping up. There would be the airline tickets to visit my mom for Thanksgiving. Then our semiannual insurance premium. Then Christmas presents. Then an unexpectedly expensive car repair. It seemed like every month had one or two of these “unpredictable” expenses. It made planning hard.
After struggling with this for some time, I finally realized: you can plan for these expenses. You just need to look a little farther into the future.
You see, most unexpected expenses really aren’t that unexpected, they’re just easy to forget. A semiannual insurance premium, for instance, predictably occurs twice a year. Christmas happens every December 25th. Mom wants a visit at least once a year (okay, twice a year).
Here’s a list of some of our expenses that may or may not come at predictable times, but they definitely come some time:
- Property taxes (so expensive! Like $8,000 per year expensive!)
- Insurance with semiannual premiums (we do all our insurance this way, it saves a little money) (also expensive!)
- Automobile registration (gets less expensive each year your vehicle gets older!)
- Phone plan (we use Mint Mobile, you can buy a year at a time for a discount)
- YNAB
- Home maintenance (various sources say to estimate spending 1-4% of your home’s value per year – you may not spend it every year but will have larger expenses every so often like paying for a new roof or HVAC system)
- Auto maintenance (I have no idea how to estimate this one… we randomly chose $500/month. If we have extra it will just help pay for our next car)
- Medical expenses (I aimed to save enough to meet our yearly deductible)
- Home projects (subjective, but necessary when your husband loves interior design and building furniture)
- Travel (again, subjective, we need to pay for a least two flights a year)
- Presents (depends how generous you are, I guess)
After compiling all these lumpy expenses, I came up with a dollar amount that we’d need for each expense for the year. Our house cost $370,000, for instance, so 3% of that for home maintenance is $11,100. Divide that by twelve, et voilà! Each month we need to set aside $925 for home maintenance. Essentially, you create sink funds for all these categories to draw upon when the lumpy expense finally appears.
I love this, because now instead of feeling slightly panicked when an “unpredictable” expense comes up, I know the money is there in the sink fund, just waiting to be used. So far I’ve done a good job predicting these “unpredictable” expenses, but if a truly new, unsaved-for expense came up we’d move things around and then I’d add a new category for the future.
This is definitely possible to do with a spreadsheet, but YNAB makes it easier to see what we’re doing (especially helpful for my husband!), and other budgeting apps have similar capabilities.
SDG