Budget Tip #1 – How to Budget for Periodic Expenses

How do you budget for those expenses that you know are coming, but that don’t show up every month? You know, like insurance payments, birthday and holiday gifts, or car maintenance? We call those periodic expenses and they can wreak havoc with your paycheck if you don’t plan for them. What happens if you didn’t save for the $600 it takes to replace the tires on your car? If you don’t have the money set aside, you probably have to turn to your credit cards and that’s never a good option.

The better solution is to plan ahead and work that $600 expense into your regular monthly budget. If you know that you will need to buy new tires for the car this year, then divide the cost of the tires into 12 monthly payments and set that amount aside each month. so, in our case, $600/12 = $50 per month that we need to set aside in savings for our new set of tires.

Go ahead and make a list of all of your periodic expenses and repeat the process. Do you have back to school expenses for your kids each fall? That’s a periodic expense that you can plan for. After you are finished, you may find that you should be setting aside $75 to $100 per month for your periodic expenses. That’s OK.  With the money accumulating in your savings account, you won’t need to turn to your credit cards when the bill comes due.

That folks, is how you budget for periodic expenses.