Irregular payments are budget busters. The problem is you get paid regularly but...show more instructions
Convert Irregular Payments To A Monthly Amount
Budgeting works well if your expenses and income are consistent.
But how do you allocate your budget to expenses that are unpredictable or inconsistent?
Unpredictable or irregular expenses are bills that you pay only once a quarter, twice a year, once a year, or on an as-needed basis. Basically, any expense that does not fit into a set billing pattern would fall into this category.
They're budget busters because if you don't plan properly they can turn your finances upside-down.
Thankfully, this Irregular Payments Budget Calculator solves the problem by adding up all your irregular bills that occur reliably during the year, then converting them into monthly equivalents so that you know how much to budget each month to pay those bills.
Irregular Payments
One of the top reasons budget plans fail is because the budgeting or the cash flow planning process doesn't include irregular expenditures. The end result of these unexpected expenses is to wipe out any planned savings.
To deal with these kinds of expenses you should have an effective plan in place. Set aside money for the irregular expenses to avoid cash flow issues. If it’s an expense you know is coming then you can break the amount into monthly chunks and set that amount aside to pay when the bill comes.
A short list of irregular expenses includes:
- Car/Homeowners/Health Insurances
- Local Property Tax
- Annual Licenses
- Quarterly Tuition
- Annual Subscriptions
- Professional Dues
- Holiday Expenses
- Vacation Costs
- Annual Retirement Contributions
- Uniforms or Clothes
The Irregular Payments Budget Calculator can help you convert the amount you pay for these bills into monthly equivalents.
Start by listing all your irregular bills and how often they occur. To get the average monthly payment, just input the amount you need to pay and how often you pay this in a given year. The budget calculator will add all the payments together into a single monthly payment.
3 Ways To Handle Irregular Payments
Another way to look at the irregular payment budgeting process is what is commonly referred to as the “sinking fund” method.
Sinking funds are separatge savings accounts with a specific purpose. They work by providing you with a designated place to start saving every month to prepare for the irregular expenses.
If you're concerned about discipline problems causing you to dip into the account just to cover regular expenses then consider opening an account at another bank so it’ll be harder to get at. Another alternative is to set an automatic transfer to the sinking fund bank savings account monthly. When you do this faithfully you never have to worry about paying those large, irregular bills when they arrive because the funds will be there waiting.
Another common method for handling irregular expenses is to simply boost your budget for regular expenses beyond what you actually need. This might sound odd, but recording predictable expenses as slightly higher than what you normally pay would increase your budget allowance while giving more cash for unpredictable things.
For example, if you are budgeting for contingencies and you normally budget $90 monthly then consider increasing it to $100. This way you can increase your available funds for irregular payments.
This method works fine for people with strong savings discipline, but it runs into problems for people lacking that discipline. The unfortunate result is their budget for savings often ends up being paid to cover just their irregular expenses.
Finally, the last common mistake people make when trying to get their finances under control is not having an emergency fund. The problem is that if you don't have money set aside for those unavoidable bills, you inevitably end up adding to your credit card balance or taking a personal loan to cover the difference.
Obviously, this is not the most ideal way to handle irregular expenses. Unexpected expenses are the common culprits that add to our debt.
Final Thoughts
The truth is that unexpected expenses are common enough that you should plan for them right in your budget. Expect the unexpected.
By preparing for irregular expenses ahead of time, you get a more realistic idea of when and how you should be saving money. This prevents irregular expenses from surprising you.
Review your budget annually because bills change over time. You will need to make any necessary changes to your totals to stay on track.
Another great benefit to saving money monthly for irregular expenses is that it doesn't require much effort. Saving little by little is a lot easier than trying to come up with a lot of money in a short period of time or using credit to put a band-aid on the problem.
In summary, plan for irregular expenses now, so you won't be hurt by them later. Try out the Irregular Payments Budget Calculator today!
Irregular Payments Budget Calculator Terms & Definitions
- Irregular Payment – A payment that doesn't happen on a monthly basis.
- Budget – An estimate of income and expenditure for a set period of time.
- Payment Description – These are your billings that are infrequent, but easy to predict. An example is your life insurance bill that you pay annually or semi-annually.
- Number of Payments Per Year – This is how often you pay your irregular bill in a year.
- Amount of Each Payment – The amount you pay for your irregular expense.
- Monthly Total To Budget For Irregular Payments – This is the amount you need to save or allocate monthly for your irregular payments to ensure you'll be able to pay these bills.
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