Budgeting for Infrequent Expenses

Many people live in a state of denial about the cost of infrequent expenses. For example, it's reasonable to expect that a car eventually will need new tires, a tooth will require a filling, or a household appliance will need to be repaired or replaced. When these things happen, many people will pay for it with their credit card (and not pay off the full amount at the end of the month) instead of paying with a check.

A savings plan — All these expenses can be budget busters unless you save in advance. To create a savings plan for infrequent expenses, take a tour of your home. Figure out when you probably will need to replace appliances and mechanical systems.

To find out the average lifespan of appliances, check out Consumer Reports. This Old House is another good site that can tell you how long your HVAC, roof, etc. should last.

If you own a car, save for repairs based on whether it is new or used, mileage, type of vehicle (sports car, sedan, truck, etc.), and repair/maintenance history. Experts advise that you stash away at least $100 per month for these expenses. According to a report by the University of Illinois Extension, homeowners need to budget 1% to 2% of your home’s value each year to cover the costs of home maintenance and repairs. You also should budget for out-of-pocket expenses that aren't covered by insurance, like co-payments or certain medical devices.

Break it down —To figure out how much to save each month, create a grid. List infrequent expenses on the left side and make columns for annual and monthly budget amounts across the top. Figure out the total cost for each infrequent expense and divide that by months or years as needed. Tally your columns to get the annual or monthly total you will need to put aside. If you are paid bi-weekly, you can also add a bi-weekly total. Then, to make things easier, open a special savings account for these expenses and set up an automatic transfer of that bi-weekly amount to occur the day after payday.

Over time, higher-than-expected expenses for one item on the list will likely be balanced by below-budget expenses in another. If you choose not to open a special savings account for these expenses, try to avoid the temptation of spending the money in your regular savings on unrelated items. That way, you'll be prepared whenever an infrequent expense becomes an immediate necessity.