How to Fund an Infrequent Bills Account
One of the things my fiancé and I are going to do in 2008 is start funding an irregular bills account. I first read about this strategy at Chief Family Officer and I think it’s pretty darn brilliant, especially since my honey and I have a history of charging things like new tires.
So, what should my partner and I include in our infrequent expenses fund? We’re starting with the following based on our historical behavior and existing needs:
|
Expense |
Heidi |
Matt |
|
Auto |
||
| Car Insurance |
931.73 |
649.20 |
| Registration |
296.50 |
120.00 |
| Reg. maintenance |
270.00 |
440.00 |
|
Subtotal - Auto |
1498.23 |
1209.20 |
|
Household |
||
| Appliance |
750.00 |
500.00 |
| Repair/remodel |
500.00 |
250.00 |
|
Subtotal - Household |
1250.00 |
750.00 |
|
Totals |
2748.23 |
1959.20 |
|
Contribution per pay period |
$105.70 |
$75.35 |
As you can see, my car insurance is significantly more expensive than my Matt’s - I am definitely the lead foot in the family. My registration is more expensive since I drive a newer car, and he needs more in his auto maintenance allocation due to the fact that he commutes 40 miles one way every week day. I am taking on a little more repair/remodel expense since I make more of the income and the house is in my name. Our property taxes are taken out of escrow (which I fund with my house payment), so we don’t need to budget for that here.
One hundred dollars a paycheck may not sound like much, but it’s going to be a stretch for me to come up with since we just began funding our wedding account this last fall (I suppose that’s an infrequent bill account in its own right). Hopefully our annual raises and bonuses, which we get in March, will be enough to at least partially fund both accounts.
The actual opening of this account is another matter altogether. This is a milestone in my life as it will be the first joint bank account I’ve had since moving out of my parents’ house at age 18. I’m terrified of not having 100% of the control - and you know how I feel about joint accounts - but a good marriage is based on trust and communication, right? This will be a good way for my fiancé and me to get our feet wet with whole joint finances thing.
Do any readers out there handle irregular expenses in this way? What goes into your infrequent bills account?
Stumble it!
January 3rd, 2008 at 10:52 pm
Rather than what goes in (I’ll scare you if I give actual figures), I’ll tell you what I pay for out of that account now that I have it (and love it! - I’m sure you will too).
Car insurance
Property taxes
Home insurance
Life insurance
Disability insurance
Umbrella policy
Earthquake insurance
Home warranty policy
On top of the monthly amount for these expenses, I contribute an extra amount that I figure covers basic car and house maintenance. (Bigger expenses would come out of our emergency fund).
As I’ve mentioned before on my site, I wish I’d started this account back when I was at your stage in life. We’d be many thousands richer. So I wish you good luck, not that I think you’ll need it!
January 3rd, 2008 at 11:02 pm
We don’t have one yet, but we have plans for something like that. We’re still working on our first consolidated bank account. First we’ll consolidate our various accounts, then we’ll set up special separate accounts, then a joint account for insurance and whatnot. Unfortunately, there have been a few hangups. Fortunately, things are moving in the right direction.
January 4th, 2008 at 12:33 am
We do put money aside every check for things like this as well. We have one for household purchases (lightbulbs, dish soap, detergent, water filters), one for personal purchases (toothpaste, razers, shampoo), car maintenance, registrations and a couple others. I know some of them seem too small to worry about but I don’t like these things sneaking up on me. I use the program Mvelopes Personal
you can read a little about it on my page if you would like. It really helps me with all the little “accounts”.
Good Luck!
January 4th, 2008 at 1:15 am
We have all of those type of bills built into Microsoft Money and track the total amount of the irregular bills. We then try to fund every two weeks the amount needed.
I will also use bonuses or extra money that comes up for the fund as well.
January 4th, 2008 at 9:27 am
These are great ideas. I’ve set up a few “sinking funds,” as I like to call them, to catch these intermitten expenses throughout the year. It helps to put away a little bit all along than try to cash flow one big cash outlay when the expense occurs.
January 4th, 2008 at 12:23 pm
Here’s my list of irregular expenses:
1. Property taxes (I own my home)
2. Car Registration/tags
3. Car Repairs - estimated
4. House Repairs - estimated
5. Pet care - when I go on vacation
6. Eye glasses - if I want a new pair every year
7. Christmas Spending
8. Birthday gifts
9. Vacation
10. Tax preparation fee (estimated)
For me, my auto ins., home ins. and life insurance are monthly bills so that’s why they aren’t included in the above list. When I added up all my projected & estimated yearly irregular expenses and divided by 12, I was surprised by how much I had to save per month. It showed me I don’t have any business spending money on impulse purchases. But I really don’t want to because it is very satisfying for me to know that I can meet all my monthly bills, and then I’m budgeting/saving monthly for the irregular ones too. It’s a relaxing kind of a feeling.
January 4th, 2008 at 1:13 pm
@ Sandy - Pet Care! Good thought. This year we spent about $300 on kenneling our dog - and that doesn’t count her annual visit to the vet. Guess I need to add at least $500 for her care.
@CFO - right now we only have life insurance policies through our work. After the wedding we plan on getting additional policies - that will need to be added as well. Good call!
January 4th, 2008 at 1:23 pm
Creating an infrequent-bills account
When the car insurance comes due, do you have the money on hand to pay for it? You can prepare for this and other expected but infrequent expenses by setting up an infrequent-bills account. Heidi the BankerGirl borrowed this idea from Chief Family Offi…
January 4th, 2008 at 4:55 pm
I don’t have a separate account for this, but I do put aside extra money each month for:
* car expenses (gas, insurance, registration, maintenance, repairs)
* toward my next car (just $50/month)
* house expenses (repair and replacement of things - I’ve heard it should be 1-2% of the current value of your home per year)
* expensive fun things (vacations, computers, furniture)
* house renovation fund
* health care expenses
January 4th, 2008 at 10:53 pm
Heidi - I found the easiest way to figure out how much to contribute to my infrequent bills account was simply to run through my Quicken budget. It’s easy to adjust your contribution amount as you acquire more expenses. Since I am paying one insurance bill or another for each of the next few months, I simply deduct the amount of that bill from the contribution amount. Which reminds me, to that insurance bills list I provided above, you can a personal articles policy that covers my engagement ring.
I also wanted to recommend that if you can, you start off the account with a little bit of “seed money” - this worked especially well for me because I started the account mid-year, yet I was hit with a slew of big bills at the end of the year. I ended up using 1/5 of the seed money to cover the expenses, instead of having to dip into my emergency fund. Now I feel like I’m starting at zero, so to speak. Each month’s contribution should add up such at the end of 2008, I’ll be coming out about even. And incidentally, I increased my monthly contribution for 2008 to cover increases in things like property taxes, car expenses, etc. I plan on increasing the amount each year.
January 6th, 2008 at 10:57 am
Interesting timing, I just started an irregular expenses account in December. I also started House, Car, and Christmas funds. I like the idea of automating the funding of these accounts and getting away from the habit of tapping my emergency fund for unusual expenses.
By the way, just discovered your site from a link at collectingmycash.com. Looks like I’ve been missing some great content.
January 8th, 2008 at 6:58 pm
This is a really great idea. I just set up sub-savings accounts at my credit union, I’ll have to add an “infrequent bills” category.