Personal Finance

How to Budget for One-Time Expenses

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Even if you’re an old hand at budgeting, you probably get tripped up by the occasional “unexpected” expense. One-off expenses like car registration fees, annual HVAC maintenance appointments, and even routine medical expenses can throw even the most detailed budget for a loop.

If you’re ready to be better prepared – instead of being surprised time and time again – use one or more of these options to earmark money for those one-off expenses.

1. Open a Savings Account

One of the best ways to earmark money for those one-off expenses is to open a savings account – or even multiple savings accounts – just for these expenses. That way, you can set aside a small portion of the expense each month. When it comes time to pay the bill, you’ll have the money in your account – ready and waiting.

Many banks still do offer completely free savings accounts, though you may need to search around a bit for a maintenance-fee-free account. And while you’re at it, see if your bank will allow you to open multiple free savings accounts. Sometimes it’s helpful to have one account for things like Christmas and birthdays, another for longer-term savings goals, and another for annual expenses.

2. Sock Away Your Bonuses

If you get annual bonuses – or even a yearly birthday check from your Grandma – hold on to that cash. It’s tempting to blow this money, since it seems like icing on the cake. But bonuses and gifts are a great way to painlessly save for one-off expenses.

So the next time your boss gives you a great review and a hefty check to boot, stick it into your savings account. Use that money to pay for annual or one-time expenses that you weren’t really expecting. Then, if you get a similar bonus next year, use what’s left of this year’s bonus to treat yourself.

3. Get a Month Ahead

One of the best ways to roll with the punches when it comes to your budget is to get a month ahead. It’s a simple concept that makes covering one-off expenses easy.

Here’s how it works:

  • You need $3,500 to pay a month’s worth of expenses, so you save up that money during March, April and May, for example.
  • By June 1, you have $3,500 in your checking account, and you spend only that money for the month of June. During June, you’re just leaving all of your income from the month untouched.
  • In July, you spend June’s income, while socking away your paychecks from July.
  • And so on, and so forth.

The reason that this type of budget is great for one-off expenses is that you have extra money available in your checking account when you need it.

If, for instance, your car registration is “unexpectedly” due in August (because you forgot that it comes due that month every year), you can go ahead and pay for it. You take the money out of your income for August – instead of your already-budgeted-for income from July that you’re now spending. Then, in September, you decide where you’ll cut back to account for the extra money you spent in August.

Basically, you buy yourself an extra month to deal with the unexpected – whether it’s truly an unexpected event like an E.R. run or an annual expense that you just forgot about.

These certainly aren’t the only options for setting aside money for one-off expenses. Excellent budgeters can even leave that money in their checking accounts, assured that it won’t “accidentally” get spent until it’s time to pay that annual bill.

But if you need a little help separating “extra” money from “earmarked” money, then one of these options might be a good fit for you.

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Image: Vladimir Voronin

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