How to Budget for Irregular Expenses

Posted by Mrs Money on January 5th, 2011

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For the longest time, I avoided budgeting because I hated not knowing exactly how much each bill was going to cost me. The biggest problem for me was that each month I had no idea how much our electricity bill was going to be. Of course, we do the best we can to ensure that it’s not too expensive while maintaining our comfort, but it could range anywhere from $80-$180 each month, depending on our usage. My number one irregular expense was our electricity bill, but yours may be something totally different, like daycare, so apply this to whatever bill it is that you have that’s an irregular amount each month. I decided I had a few options to budget for our irregular expenses.

1. I could call the electric company and get set up on their budget plan that basically takes your annual electricity bill total and divides it by 12. They then bill you that amount each month so that in the winter your bills aren’t astronomical while you’re loving it in the summer. This is a great method for people that aren’t as anal about their money as I am, and I figured I’d rather take matters in my own hands and deal with it myself. Not to mention, I’d be giving them extra money in the summer that I could be using for something else or earning interest on (ha!). That led me to my next idea.

2. Add up the annual electricity bill myself and divide it by 12. I can transfer that amount each month to a savings account and then have our electric company draft the payment out each month. This won’t help me much through this winter because we’re already into the higher electric bills, so I won’t have enough money to pay the winter electric bills. Boo.

3. Set aside a set amount each month in a separate savings account and then have the electric company draft the bill amount out each month. The excess will be saved in the account and put towards the future usage. In the winter, I’ll transfer more. In the summer, I’ll transfer less. I’ll work on padding the account enough that next winter I’ll be able to start transferring the average amount of the whole year divided by twelve into the account. I’ll have enough saved by then that I can do that.

The last option won out, and I opened yet another sub account with ING. I transferred $150 into that account to get it started. If our electric bill is more than that for this month, I’ll just add some more from our checking account. If it’s less, great. I’ll leave it in there so I get that buffer built up. I’m going to have the company draft the bill out of that account so I don’t have to worry about it. I won’t have to think if we have enough money in checking to cover bills; I’ll know! This is going to work out so much better than my old plan of guessing. ;)

How do you budget for irregular expenses?

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18 Responses to “How to Budget for Irregular Expenses”


  1. AJ says:

    Our electric bill is the one we never know what to expect every month. Summer is the worst for us, being in Georgia, the A/C costs are outrageous. So while I love my $50-$60 bills in the fall and spring, summer is easily $200-$250 per month. So I budget the highest, $250, every month and when it’s lower I just transfer the leftover into savings. It works for now. This winter we were shocked when we checked our bill. Not use to having to use the heat so much – we usually keep it off completely, but with the baby we definitely couldn’t do that, so I was hit with a $150 bill for December. That’s a record high for us for winter. So glad I budget high though, it works for now. Our friends did the budget billing, but at the end of the year they got hit with a HUGE bill because their “average” per month didn’t cover their actual usage, so be careful with that (they paid $212/mo and in December had a $752 overage bill!!). Unfortunately our power company has up rates by 14% this month, so we’ll probably have to adjust the budget. By 2012 it will be going up again by 23%. :(

    [Reply]

    Mrs Money Reply:

    AJ- WOW! That is nuts. A $752 overage bill would suck! That’s one reason I don’t want to trust them to do the averaging for me. 23% is a horrible jump in rates! Just another reason we need alternative energy.

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  2. Jessica07 says:

    Oh dear! Now THAT is what I call financial planning! ;)

    We always keep a certain amount in each of our checking accounts in case irregular expenses pop up. It’s just like a little padding that is outside of our actual Savings and Emergency Fund. Each one of us cannot get below that level in our checking account, or we get flogged by the other one. Ha-ha. Just kidding.

    [Reply]

    Mrs Money Reply:

    Jessica- Haha, I am a little cray about it. I like to keep a little extra in our checking too for things we forget about!

    [Reply]

  3. krantcents says:

    Good ideas. I would add there are things such as CFL lights and more efficient appliances that would lower your bill. This can be your second step now that you are putting aside money.

    [Reply]

    Mrs Money Reply:

    krantcents- We’ve upgraded pretty much every one of our appliances minus the stove since we bought our house. Great idea though, because now maybe we can save for solar! :)

    [Reply]

  4. jen says:

    We take our largest electric bill and use that amount for our budget all year. Most of the year it falls well under budget so we use the amount that we are under budget and we apply it to the current debt that we are working to knock out. I try to budget high for the utilities and enjoy having that extra money to apply to our goals. I keep track of our money saved all through the week and make a weekly transfer to attack our debt. It gives me some incentive to work hard and not bust the budget. (We have been wearing multiple layers and trying to keep the heat as low as possible.)

    [Reply]

    Mrs Money Reply:

    jen- Smart idea! I think that is awesome! I’ll probably start doing this. Thanks so much for sharing! :)

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  5. I agree — I love knowing exactly how much my bill is going to be each and every month. I split my hydro bill to do monthly — then, if for some reason its NOT on plan, they charge me the difference (a few bucks) in January. Keeps life simple and predictable.

    [Reply]

    Mrs Money Reply:

    twentysomethingmoney- I agree, anything to simplify paying bills helps!

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  6. Graham says:

    Interesting take on irregular budgets. Similar to what jen discussed, I simply apply any extra finances to debt, or put it to my etrade account. However, reading krantcents post also inspired an idea to apply any extra funds to minimizing future irregular expenses. (e.g. energy saving bulbs, energy efficient appliances, even new insulation or a hybrid car!!)

    [Reply]

    Mrs Money Reply:

    Graham- I like both those ideas too! I think I’m going to what jen does and also start making improvements where I can (like extra insulation in the attic, etc). :)

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  7. Heather says:

    We use the electric company’s equal-billing feature. It has made budgeting super-easy, and in the four years we’ve used it, we haven’t had any billing issues.

    (We also are both teachers, so the two months with highest electricity bills here in Phoenix were the two months we had no income. Made no sense to do anything else.)

    Otherwise, our variable bills vary by maybe $15 at most — usually within $5 month-to-month — so we don’t have to tackle this much.

    [Reply]

    Mrs Money Reply:

    Heather- That’s really cool! $15 is not that much of a variation. I’d be happy with that. :)

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  8. For many years I have been on the year round payment plan and paid the same amount of money every month to the electrical company. Recently there were some changes made and we had to reapply to get on the monthly payment plan. I decided to go ahead and open an ING sub-account and just transfer the additional amount we’ve been paying to the electricity company, into the savings. I’ll make a few pennies by the time summer gets here, maybe almost a dollar! :-)

    [Reply]

    Mrs Money Reply:

    Mrs. A- Haha, I know it’s not much, but the fact that YOU are making the money instead of the company rocks! ;)

    [Reply]

  9. I do exactly what AJ does…maybe the hot climate affects one’s thinking! ;-)

    Here in the Valley of the We-Do-Mean Sun, my summer power bills get up around $225, and water bills for my xeric yard can go as high as $125 or $130. So those are the numbers that go into my budget year-round.

    The budget is set up so I can afford that (don’t like it, but can do it…). This means that in the winter, when power bills drop to around $80, I end up with LOTS of spending money. Then I can I buy clothes and other stuff I can’t afford when every penny has to be allocated to budget items.

    Heh heh heh…LOVE Mrs. A’s idea.

    [Reply]


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