4 tips to budget for irregular expenses
Bills that fluctuate in amount can really throw a budget off. And irregular bills can account for a good chunk of overall monthly expenses.
Think things like electricity, gas, groceries, water. These monthly expenses make it difficult to sit down once a month and create your budget, then leave it. That’s a sure way to dig yourself into a money hole.
So what can you do about it?
1. Start with a baseline, then adjust
This is the method we use, but it does require more attention to the monthly budget than sitting down once per month.
The idea behind this method is budgeting monthly with the smallest amount for each of your irregular bills.
For example: if your electricity bill is always over $50, no matter the season, then use that as your baseline. Every month, under the electricity budget item, add $50.
Utility companies will typically send you the bill for the month with plenty of notice, so you will make your necessary adjustments from there.
Now, if you’re using a zero-based budget (like we are), you will also be waiting until all of your bills for the month have come in until you allocate all of your funds elsewhere.
Once all of the bills have been paid, transfer the remainder of your funds to whatever your goal is at the moment. Paying off debt? Throw the remainder of that money toward your smallest debt. Saving up your emergency fund? Deposit that money into the emergency account.
Again, this one takes a lot of attention and fine-tuning your monthly budget.
2. Pay set amount each month
With this method, you are creating a miniature savings account for your irregular bills.
This method requires using some of tip #4 in this list. Think back to your bills over the course of a year. Figure out a good median for each of your irregular bills, and this will be the set amount you “pay”. “Pay” is really throwing that money in your irregular bills savings.
It will very likely take tweaking over time. You will probably not calculate the perfect median at the beginning, and that’s okay. Start compensating the next month.
There will be months where some of your irregular bills are lower, and you will have a surplus (don’t touch that money). Those months will be countered by months where you are paying more than the median amount, and that surplus will come in handy.
You have to be diligent and responsible if you are going to use this tip. The savings isn’t meant to be used for anything other than those irregular bills. If you do, it will hurt down the road.
3. If it’s a bill, call company to ask about a set rate
The difference between this and the previous tip is this one involves talking with the company to make the set amount official.
Some companies out there, mostly electricity and gas companies, offer 12 months of set rates. This can help immensely if you are not into fine-tuning your monthly budget, because it can help you set it and forget it.
4. Use common sense
This one is something that should be used with all of the three steps above, but could be used alone too.
We live down in southern Texas, and the heat and humidity here is no joke.
During the summer, it seems like the AC is running almost all day, every day. Because of that, our electricity bill can climb pretty high. During the winter, we use gas to heat the house, so our gas bill gets a little higher, but electricity is significantly lower.
That’s the gist of using common sense.
And that’s that! Do you have any tips to combat irregular monthly expenses? What works best for your family?