19
- July
2013
Posted By : Teri
Gotcha! – Planning for Periodic Expenses

Do you know that feeling you get when you open the mailbox and find your car registration renewal?  Does back-to-school time send you into a financial frenzy?

You’re not alone, many of us get caught off guard when these less-typical expenses “pop-up”.

Here’s a plan for how to build a cash cushion, or “pop-up” savings account.  Unlike other savings accounts, this account is specifically allocated to cover all of these expenses that pop-up periodically.

Here’s how you begin:

  1. Gather old bank statements, or just get out a calendar.
  2. Write down your expenses that fall outside of your normal budget in the month that they pop-up.  Include such items as:
  • car registration
  • back-to-school (school-supplies, clothes, haircuts, etc.)
  • dentist and doctor co-pays for routine check-ups
  • oil changes
  • birthdays
  • pet vaccines and annual exams

Here is a periodic expense chart that you can download and customize for yourself.

Once you add up a year’s worth of expenses – it’s a big chunk of change!  Divide that number by 12 and this is the amount you need to enter into your budget to cover pop-up expenses.

 

Note:  You’ll notice that some months might require more cash to cover your periodic expenses before your savings has built up to that amount.  If your pop-up expenses are heavy in the beginning of the year before you’ve built up the cushion, you might have to re-arrange the timing of some of your expenses, or you’ll have to contribute extra money to your pop-up savings in the beginning to cover everything.

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