1/23/2014 4:30 PM ET|
25 annual expenses to budget for now
You know the routine by now -- certain bills come due at certain times of the year. Here's how to make sure you're prepared for the next 12 months.
Did the holidays sneak up on you last year? Do you find yourself scrambling for cash to pay insurance premiums or car registration fees? Do copays for your annual dental and eye exams throw your budget out of whack?
If you're like many people, you forget about some of these annual expenses. Even though you know you'll have to pay them at some point during the year, they're out of sight and out of mind until you get hit with an unexpected bill.
And when you're suddenly scrambling to pay $200 for your car registration, $500 for holiday gifts or even $75 for your dental visit copay, your whole monthly budget gets thrown off. Then, you just wind up on a financial roller coaster for the entire year.
But you don't have to live this way. Instead of dealing with constant unexpected expenses, learn to expect these annual costs. Add them into your budget each month, and you'll be cool as a cucumber when those bills come in the mail.
Monthly budgeting for annual expenses
Budgeting for annual expenses when you make a monthly or biweekly budget is simple. Just divide the total expense by 12, and set aside 1/12 of the overall payment each month.
You can leave this money in your checking account until you need it, or move it over to savings for safe keeping. Having immediate access to the money when it comes time to pay these expenses matters more than where it's kept.
So to start your new year off right, go through last year's spending to find the annual expenses you need to account for. Add up how much you spent on charges that come at the same time each year, divide it by 12 and set aside some cash each month for these budget items.
25 common annual expenses
Your list of annual expenses will vary, depending on your circumstances. So you'll want to take the time to look over last year's spending. Check for expenses that came up once – or twice, if they're paid every six months – and write down the cost for each one.
Just so you don't miss any annual charges in your budget, here's a list of 25 of the most common yearly expenses:
- Auto registration fees
- Annual scheduled car maintenance
- New tires and brakes (as needed)
- Car insurance premiums
- Renter's insurance premiums
- Holiday, birthday and anniversary gifts
- Holiday and birthday parties/entertaining
- Pet wellness visits and vaccinations
- Pet tag/licensing fees
- Copays for annual physicals, dental exams and eye exams
- Life insurance premiums
- Union dues
- Professional licensing/subscription fees
- Warehouse club membership fees
- AAA membership fees
- Other membership dues (local museums, zoos, etc.)
- Annual credit card fees
- Tax preparation fees
- Annual home maintenance (carpet cleaning, gutter cleaning, tree trimming, etc.)
- Magazine and newspaper subscriptions
- Other subscriptions (Netflix, Amazon Prime, Hulu, etc.)
- Homeowner's insurance and taxes (if they aren't escrowed with your mortgage payments)
- Homeowners association fees
- Taxes on side business income or interest income
The first time you decide to budget for annual expenses, it can take some time. After all, you'll need to go back over bank statements or your budgeting software for the past year to make sure you account for everything.
But it won't take long before you see the benefits of budgeting each month for annual and one-off expenses. As soon as you get hit with the bill for your life insurance premiums, or the reminder to renew your license plates, you'll breathe easier knowing you already have that money set aside.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
I am currently saving 12% on the way to 20% of may annual income as well as having a nice pension to boot.
But this is not going to do me any good if the Obama gets his way and takes all money I have saved for retirement and then spreading the wealth to all the deadbeats and leeches of society.
If you have amount equal to 6-8 months of your expenses sitting in your emergency fund, then this is not a problem.
Stop living so close to the edge.
Fixed expense - mortgage, car payment, insurance, cable/internet, cellular, Rx prescriptions
Variable expense - power, gas, water, sewer & garbage, hair care
Annual expense - renter's insurance, eye exams and lenses, physicals, automotive maintenance and registration, warehouse club dues (divide by 12 to give the month's amount on these)
Next, figure out how much you can get by with spending a month on everyday things like groceries, gasoline, clothing, personal and households items, haircut, and general entertainment expenses. That is what you will be spending your disposable income on. If you don't have enough after subtracting the above expenses from income, look at your expenses and where you can cut them (do you REALLY need all those HDTV channels and that super-duper internet speed?). Ideally, you should have 20% of your disposable income left over to put into some sort of savings plan.
Finally, keep a log of where you spend every single penny for one month. You will be surprised how quickly that once or twice a week fast food trip on your lunch hour or that vending machine purchase adds up. You'll probably be surprised where you find money pits. I went from being $25k in debt to having $25k in savings in just five years. There are a lot of things you CAN live without, and there are ways to spend less for the same things if you do your homework.
I'm going to have to ask my wife if I can get an updated cost breakdown of everything, just so I know.
Can I suggest that those who are unable to save money or are otherwise too irresponsible are not going to be persuaded by a list of reasons?
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON PERSONAL FINANCE
Some workers lose up to a quarter of their paychecks paying off old debt from credit cards, medical bills and student loans, as well as child support.