I love the disclaimer most Personal Finance bloggers have on their websites.
It usually goes something like this:
The information contained within this blog from all writers is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research everything you read here and seek professional representation before acting on any information you may have found in this blog.
With of course different wording and permutations, dependent on the blogger’s style. But you get the gist.
It’s our peoples version of the “May contain nuts” disclaimer. 😛
So here’s my nut…
Well one of them. (ewwwwww! minds out of the gutter people!)
One of the ways I know has helped me in terms of budgeting, and not being caught with my pants down (really I’m not trying to insert all these crotch references into this post, it’s just happening), is putting aside $50 every pay check, for those quarterly bills. Since I’m renting I don’t have to pay for gas or water, only electricity. So $50 every two weeks is more than enough.
From a quick calculation, that gives me every quarter about $300 – $350 dollars. My electricity bill has never hit over the $300 mark. The most I’ve ever had to pay was $260. Now you can choose to roll over that money, or splurge it on something. I always tend to splurge on a nice bottle of wine.
Having that fund for those large quarterly bills have been a godsend. My budget really only leaves me with about $110 dollars for incidentals, after I take out rent, debt repayments, grocery and more regular bills (phone and internet). So if I had to squeeze an extra $150 from somewhere every 3 months (for the worst case scenario) I’d go absolutely guano.
Now you if you have other large quarterly (other utilities), half-yearly (I don’t know of anything that does half-yearly invoicing but you never know), or yearly (car registration) you could increase the amount of money you contribute to this fund every week, even $5 a week would give you $260 to use for your car registration. That might not cover it, but at least you won’t be looking for the the full amount, in an already tight budget.
Now some people could suggest that you put all this money within your emergency fund, combine the funds. More funds = More interest. If that works for you, I’m more than down with that (wow, listen to me get all “street”. Word). But I’ve put my emergency fund into an account that gives me an extra 5% interest rate on months I don’t do any withdrawals, so I am loathe to withdraw from it unless it really truly is an emergency.
And since I know those bills will eventually come, I really don’t consider it an emergency. Which is why I have a second account (which has a relatively high interest rate, but doesn’t penalise for withdrawals, but doesn’t give that extra 5% rate either) just for those bills.
How do you manage those large quarterly/yearly bills? Do you just take the hit on your finances when they come in? Or have you got some other fandangled method of making sure you’re not surprised?