We all know that Christmas is December 25th and family members have birthdays every year on the same date each year, but we struggle to financially plan for them. Most people also have other expenses that come up only once a year but are usually pretty consistent as far as when in the year they come due, yet we don’t always plan for those either.
I found it was mostly an issue of poor planning and lack of organization on my side. Luckily, that was an easy fix. I developed an insert for my organizational planner and for my finance binder. You can get a copy of it for your finance binder HERE.
Using this worksheet and determining your annual expenses broken down into monthly amounts to be included in your budget is vital to your success with budgeting and becoming a fully developed Financial Frog. It is unlikely that it will be perfect and you might have to make some tweaks to fit this strategy into your unique situation, but understanding and valuing this step of the financial frog process is necessary.
This step will help you figure out how much money you need to be transferring from your primary checking account into your general savings account like we discussed in the separate post Banking Strategy.
As mentioned in that post, you will transfer the needed amount each month and when the expense comes due, withdraw cash or move the funds into your spending checking account to make the necessary purchases or payments.
With the worksheet in front of you, go month by month and think of any holidays, birthdays, and annual costs that pertain to your family and write them down in the corresponding month’s box.
For me there’s all 3 kids’ birthdays (April, Nov, and Dec), my husband’s birthday (Aug), my birthday (Dec), Easter, Mother’s Day, Father’s Day, Anniversary, Back to School, Amazon Prime, Halloween, Christmas, Car Registrations, Pet Medical Costs, and a lump sum for extended family and friends’ birthdays.
For some people you may have insurance premiums, taxes, property taxes on a home, members, licensing, and other holidays or family events that my family doesn’t have at this time. (There’s a running list below of various annual expenses I could think of to help jog your mind.)
For example, some people go all out for Valentine’s Day each year and buy their significant other gifts and kids gifts, and maybe go out to eat or another date night activity. In our house, we choose not to do much more than a small dessert like treat and a love note. It’s just not our thing and we would rather not spend our funds on that. If we have reward points or gift cards that we got for Christmas, we might use those to do something more than just the basics, but it isn’t something I include in our annual expenses budget.
(In case you’re wondering how we pay for Valentine’s Day or holidays like Memorial Day and the 4th of July, the additional food costs come out of our grocery budget and the other items come out of the general spending budget in those months. Knowing we will spend more on food at the end of May, we plan less expensive meals for the other weeks.)
Now that you have all of your expenses written down under the month they are expected to occur, write the amount you are expecting to spend for each of those expenses in the box to the right of the expense. If you don’t have an exact amount for something, say vehicle registration which changes each year and only gives you approximately 30 day notice, estimate in good faith and round up. It’s always better to plan for a higher amount and not need it, than to plan too low and not have enough funds.
Once you have all the amounts written down next to the expenses, total them all up and write the annual total at the bottom of the worksheet. Divide that amount by 12 to determine the monthly amount needed to set aside. If you want to build in a cushion in case costs go up, or you aren’t confident in your estimations, multiply the monthly amount by 1.01 to add a 1% cushion which should be enough.
Don’t forget, you control how much you spend on birthdays, holidays, and other similar annual expenses. You don’t have that same level of control for vehicle registration, taxes, memberships, licensing fees, taxes, etc. Make sure you are sticking to your budgeted amount for the things you can control and make educated guesses for the things you can’t control so you don’t find yourself unprepared and having to use funds allocated to other expenses or goals.
List to Help You Brainstorm Your Annual Expenses
- Birthdays (immediate family, extended family, friends, kid’s classmates)
- Holidays (Valentine’s, Easter, Mother’s Day, Memorial Day, Father’s Day, July 4th, Labor Day, Halloween, Thanksgiving, Christmas, Hanukkah, Kwanzaa)
- Vehicle Registration
- Vehicle Insurance
- Homeowners Insurance (might be escrowed)
- Property Taxes (might be escrowed)
- Home Warranty
- Home Maintenance
- Life Insurance
- Memberships and Subscriptions (zoos, museums, costco, amazon prime, AAA, magazines, newspapers, etc)
- Season Tickets (football, basketball, soccer, baseball, hockey, etc)
- Back to School Expenses (clothing, shoes, fees, registration, supplies, etc)
- Licensing (if it is professional licensing make sure you’ve thought about whether it should be handled from a business account and a business budget rather than your personal budget)
- Pet Vet Costs (shots, exam, cleaning, meds, registration, etc)