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”.
Similar to holiday savings accounts offered by many banks, you can open a savings account put money in it every month to cover these less-frequent-but-often-large expenses.
Here’s a plan for building a cash cushion, or “pop-up” savings account.
Here’s how you begin:
- Refer to old bank statements, or get out a calendar to trigger your memory of out of the ordinary expenses.
- Write down your expenses (lumped by month) that fall outside of your normal spending. 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/holidays
- pet vaccines and annual exams
Once you have the full year accounted for, add up the total of all these periodic expenses. When you do – it’s a big chunk of change! You can now divide that number by 12 and this is the amount you need to set aside every month in a special savings account to cover pop-up expenses.
Note: You’ll notice that some months might require more cash to cover your periodic expenses than you have built up in your savings. If your pop-up expenses are heavy in the beginning of the year before you’ve built up the cushion, you might have to contribute extra money to your pop-up savings in the beginning to cover everything.