How To Prepare Your Family For Expenses Of The Irregular Kind
It’s that time of the month again.
I’m of course talking about bills. Time to pay the bills.
What did you think I was talking about?
Anyway. Bills. To a lot of families, this is a tough time. Most of your family’s salary vanishes in a heartbeat when you pay the bills.
If you're like me, and most other people, some months are harder than others. It's when those irregular expenses hit.
Irregular... What? Whaddaya Mean?
Not everyone might be familiar with what I'm talking about here, so I'll explain a bit.
Irregular expenses are ones that don't hit you on a frequent, let's say monthly basis. They are usually yearly fees or costs of some sort and they tend to be HUGE compared to the more regular expenses.
That's why they hurt so much.
That is unless you're prepared for them.
What Kind of Irregular Expenses
There are a few different kinds of expenses you need to keep in mind. I'll break them down into categories here. It's not supposed to be a list that covers everything, it's only meant to give you an idea.
Regular Irregular Expenses
Did I confuse you with that headline? That wasn't my intention.
Let me explain this a bit then. What I mean with this is expenses that occur on a regular basis, but not so often to be an ordinary expense.
What I'm talking about in this category is for instance
- HOA fees
- Maintenance on your car, motorcycle, bicykle, horse or other transporation
- Veterinary annual check-up
- Yearly medical visits
- Gifts and presents
Most of these things are more or less the same from year to year with some increase based on inflation and the likes. Taxes vary depending on your income among other things, but you should have a pretty good idea anyway.
The thing that could need some more explanation is the list item gifts and presents. You might wonder how I view this as a regular expense.
Let me explain how we handle this in our family. We sat down and looked at who we usually buy presents for in any given year. We set a max amount of money we'll spend on each person and we found a total by multiplying people by money. That's our yearly regular expense for gifts.
If you're wondering, the value is the same even if it's a gift calculated for 3-year old or a 45-year old. It's to get a good value that would work for most people. If the gift for the 45-year old is cheaper then we can put more money to the 3-year old. Toys are expensive.
Sort Of Predictable Irregular Expenses
I should come up with better headlines. But anyway, these kind of expenses aren't fees or bills as in the previous category. Not really.
Here I'm talking more about things that you can assume you will have to pay on a sort of regular basis.
Let's look at some examples
- New cell phone
- New computer
- Upgrades to the children room
Haircuts could be monthly, regular I suppose. Don't ask me, I don't have hair anymore. But since they're regular enough and usually you know the cost of them before they occur, you can prepare.
Cell phones and computers have an almost ridiculously short lifespan. Most people change their phone each year, even if it works and serves them well still. This makes the frugal side of me get twitches in my eye. But still, it's an expense you can foresee.
If you're like me, you use the phone until it doesn't work anymore and then switch. I'd say that you should still calculate for a cell phone today to have a lifespan of around 24-36 months. If you have other numbers, go for those though.
Completely Unexpected Irregular
You had no idea your fridge would get infested with tiny, mutated, ill-tempered badgers. That leads to you having to blow it up which resulted in a part of the wall of the house collapsing.
You had no idea your fridge would get infested with tiny, mutated, ill-tempered badgers. - Unexpected expenses
That's not the first scenario that comes to mind for anyone else? Ok.
But the part about the fridge blowing up, or at least breaking down, that could happen. It's completely unexpected in both cases. The first scenario more so than the other, boring, case.
Other things that fall into unexpected irregular expense could be
- Car repairs
- Veterinary emergency
- Urgent repairs on house or apartment
- Gifts and presents
Repairs and emergencies are the toughest things to plan for since you can't look to history. That our family's car broke down doesn't mean it will break again this year. At least I sure as heck hope so.
To add to the headache, you never know what will break and how much it will cost to fix. This makes this category twice as hard to handle.
Gifts and presents can also be completely unexpected. This could be if people get engaged or married without prior notice. It could also be that a political decision forces us to celebrate Christmas twice this year. That would be very unexpected and would sure put a dent in the wallet. Although, and unfortunately, very unlikely. I miss Santa.
What To Do About These Irregular Expenses Then?
If you didn't figure it out yet, this is a budgeting post in disguise.
Gotcha to read a post on budgeting, ha!
As with all budgeting, it's about getting an idea of what to expect so that you can prepare for it. The best way to get an idea when it comes to these expenses is by looking at your past history. Much like with any budgeting.
Go back in your expenses for a year and see when big, irregular expenses like these hit.
The Regular Irregulars
Let's try to keep this a bit simple at first to get the idea clear. Take a car insurance for instance. We say that you pay a total annual cost of 800 bucks on your car insurance.
For me, it used to be that I knew our car insurance cost would hit some time during spring. I never bothered looking it up much and then it hit, in May. And every year May's budget crashed.
A while back we started budgeting for the car insurance by splitting the cost by 12. So we made the cost into a monthly "bill" that we put aside in an account to sit and wait to pay the insurance in May. We enjoy a lower total cost because we pay the entire amount in one go, instead of doing monthly payments.
In our imaginary $800 car insurance case, it would be 800/12 = 66.67. So every month you would set aside 67 bucks to prepare for the annual fee. It's much easier to handle big expenses this way. It's also giving peace of mind to know you have the money when the bill hits.
The Sort Of Irregulars
It gets a bit more difficult to handle these since you don't know exactly when expenses will occur. Let's take the cell phone for example again.
You might have budgeted your phone's lifespan to 2 years. Assume you'll then plan on buying a new phone for $700. That means that you will have to set aside (700/24=29.16) 29.20 bucks per month.
Cool, in two years you'll have a brand new phone. But, what if before mentioned mutated badgers invade your bedroom one night. They haven't had their fill of Angry Birds in a while and play it on your phone until it breaks.
Damn badgers. And this was only month 14. That would leave you about $292 short of your new shiny phone. What to do?
Let's leave that hanging for a bit.
The Completely Unexpected Irregulars
This ties into the phone example above. How do you handle the things you can't predict will happen?
Well, in our case, we use our imagination and since there's no other way we also look at history. Even if we hope our car won't break down every year, we'll assume it will.
If we've had a repair on the car this year that cost $600, then we imagine we will have that cost next year too. If that doesn't happen, good. We have still saved $600 for the coming year. And we'll do the same thing again.
It's not unrealistic to think that it will take two years of savings to fix the car when it does need repairs.
Let's go back to the badger violated phone. The way you could handle this is to expect something unexpected to happen. To prepare for this, shorten the lifespan of your phone.
If you expect badgers will invade every 14 months, use this to get the monthly cost instead (700/14=50). So instead of 29-ish bucks, you set aside $50 per month. This might seem steep, so play with the numbers to what you find doable and comfortable. When the time comes after 24 months, save the money you didn't spend for the next phone. Then you don't have to account for badger assaults in 14 months.
If you don't have a history of breaking your phone, then you can hope for the best and budget what you need. If you want to change every 24 months, budget for that.
What Irregular Expense Do You Hate The Most?
There are so many fun fees, bills, and other expenses and I've only named a few. Which ones are your favorite ones to hate and do you have any tips on how to handle them yourself?