Article: Handling Periodic Expenses
Do you struggle to come up with the cash to pay your car insurance, property
taxes, or other periodic expenses? If so, you are not alone. Things like food and
gas are always on your radar, but if you only pay for something once or twice a
year, it is very easy to forget to budget for it. However, a little planning can
make paying for periodic expenses much easier.
The first step is to figure out what periodic expenses you have and how much
they cost per year. You may want to look through your bills or checking account
statements to help you remember them all. List both fixed expenses, such as
insurance, as well as variable expenses, like car repairs. Obviously, you will not
know to the penny what you will be spending on variable expenses, but you can
take an educated guess.
Next, for each periodic expense, divide the yearly cost by 12 to get the per
month amount. This way, you can start thinking of it as a monthly expense. Your
car insurance is not costing you $600 every six months—it is costing you $100
a month. (Sure, mathematically they are equivalent, but it is much easier to
come up with $100 on the spot than it is $600.) Instead of paying it to a
business, like you do with regular expenses, you will just put the money aside in
savings each month. If possible, have some of your paycheck directly deposited
into your savings account(s) or set up a regular automatic transfer from your
checking account to your savings account(s).
If, despite your best efforts, you are unable to save enough to pay your periodic
expenses on time, talk to whomever you owe. Can you lower any penalties by
paying what you can now? Can you set up a monthly payment plan? Charging
things to your credit card when you cannot pay off the balance in full the next
month is usually not wise, but in this case, it could be the best option if the
interest you are charged on your card is less than the fees you are charged for
paying the bill late. However, you don’t want to make it a habit. If you currently
cannot put enough in savings, it is a good idea to examine your expenses to see
what you can cut to free up cash.
By thinking about periodic expenses year round, they do not have to be a cause
of periodic alarm.
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