How to budget for irregular expenses
Irregular expenses can throw us all for a loop when it comes to budgeting. These expenses can vary from month to month, and can be hard to anticipate. That's why it's important to know how to budget for these expenses. In this article, we'll dive into exactly how to do that.
Assess Your Irregular Expenses
The first step to budgeting for irregular expenses is to assess exactly what those expenses are. Make a list of all the irregular expenses you can think of. This might include things like car repairs, medical expenses, and home repairs. Once you have a list of these expenses, try to estimate how much you spend on each one per year. This will help you get a general idea of how much money you need to allocate to these expenses in your budget.
Track Your Spending
The next step to budgeting for irregular expenses is to track your spending. You might already be tracking your spending on a monthly basis, but make sure to also track your irregular expenses. This will help you get a better idea of how much you spend on these types of expenses per month so you can adjust your budget accordingly.
- Use a budgeting app or software to track your spending
- Save receipts and invoices to help you remember what you spent money on
- Maintain a spreadsheet if that works best for you
Create a Budget Category
Once you know how much you spend on irregular expenses, it's time to create a budget category for them. Some people like to create a separate savings account for their irregular expenses, while others prefer to simply include them in their monthly budget. However you choose to do it, make sure you have a category in your budget specifically for irregular expenses.
Set Aside Money Each Month
Now that you have a budget category for irregular expenses, it's time to start setting aside money each month. This money will act as a buffer for those unexpected expenses that pop up throughout the year. You can choose to save a little bit each month, or you can save a larger portion of your income during certain months when you know you'll have more money coming in.
- Automate your savings by setting up a direct deposit or automatic transfer into your savings account
- Use the 50/30/20 rule - allocate 50% of your income to necessities, 30% to discretionary spending, and 20% to savings
- Adjust your budget as needed - if you're not saving enough, increase the amount you're setting aside each month
Adjust Your Budget When Necessary
Budgets are fluid and can change over time. It's important to regularly assess your budget and adjust it as needed. If you find that you're consistently overspending on irregular expenses, you may need to adjust your budget to allocate more money to that category. On the other hand, if you find that you're consistently underspending on irregular expenses, you can adjust your budget to save less money each month.
Be Proactive Rather Than Reactive
The key to successful budgeting for irregular expenses is to be proactive rather than reactive. Instead of waiting for an unexpected expense to pop up and ruin your budget, anticipate those expenses and budget for them ahead of time. This will help you avoid the stress and financial strain that comes with unexpected expenses.
Final Thoughts
Irregular expenses can be a challenge to budget for, but it's not impossible. By assessing your expenses, tracking your spending, creating a budget category, setting aside money each month, and adjusting your budget when necessary, you can successfully budget for these types of expenses. Don't forget to be proactive rather than reactive - anticipating those expenses ahead of time will help you avoid financial stress and strain.