How to Save for Annual Bills or Irregular Payments

Let’s talk about how to save for annual bills today.

Most of us, if not all of us, have specific bills that are not due each month.  There are specific bills that are due only once a year, every 6 months, or even every 3 months.  It can be a real hit to your budget or paying down debt if you’re not prepared.

There’s an easy trick to never be caught off guard by an irregular payment.

Take the full amount of the bill and divide by the number of months you have until it’s due.

Let’s take an example:

property taxes.  In most states they are due by December 31st each year.  Let’s say your property tax is $1,000.  It’s now January 1 so you have 12 months until it’s due again.  Take $1,000 and divide by 12 months.  You need to put back $83.34 each month into a savings account. By December you will have $1,000 saved.

No surprises.  You don’t have to cut into other areas of your budget or lessen your cash envelope amounts to make it work.

cash envelope system

Unless you purchase or sell property throughout the year, the amount doesn’t change that much.

TIP: I always take the amount from the previous year and add 3% to it.  Sometimes I don’t add enough and others I add too much.  Either way the difference is less than $50 each time.

how to save for annual bills

You need to do this trick with every annual or bi-annual bill.  Our trash bill is due every 3 months.  It’s only $35, which is not a budget breaker for us.  I still like to be prepared.  So every month I transfer $11.67 into our savings account.  When it’s due I simply transfer $35 to our checking account and pay the bill.  It doesn’t affect our budget at all.

Being prepared isn’t hard.  It takes a little bit of time each month, but if you’re updating your budget (like you should be) then it won’t add any more then you’re already spending.

 

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