Paying Irregular Bills
Does paying Irregular Bills create a problem for you? Do they make your funds tight for the rest of the month or even longer?
We know all year that the home insurance bill comes once a year, but so often we just aren’t prepared for it. Trying to pay it on time creates a real issue for us. I know, I’m been there sooooo many times.
Irregular bills are a common problem for most of us. Who has the extra $500 or more sitting around to pay a bill that comes once or twice a year? It definitely can be a problem.
Irregular Bills Savings Plan
There’s a solution for that problem. It’s called an Irregular Bills Savings Plan and I’m going to share how it can work for you.
Keep in mind, we are not talking about surprise bills, such as the unexpected doctor bill or paying a deductible for an automobile accident. For those you will need an Emergency Fund. We’ll talk about that in a future post.
Right now we’re talking about those anticipated occasional bills such as a 6 month propane fill-up, an annual automobile roadside insurance, home insurance, car insurance, real estate taxes, personal property taxes, etc.
They’re the ones that you know are coming, but you try to forget about them. But they arrive anyway. Sigh….
Unfortunately, there’s not just one of these irregular bills each year. Most of us have a lot of them. We finally get over the hassle of paying one and another one arrives. What a pain!
Being Proactive is the Key
You want to be proactive and prepare in advance for those bills, so that they won’t hurt your well-planned budget. If you don’t have a budget yet, that’s okay. You still want to prepare for these irregular bills.
Irregular Bills Savings Plan Worksheet
The first thing you’ll need to do is create a list of all of those bills.
We created a simple-to-use free Irregular Bills Savings Plan Worksheet just for you. Sign up for our newsletter at the end of this post to receive access to that free downloadable form.
Or you can create one on a sheet of paper. You’ll need 4 columns with these headings:
- Due Date
- Amount Due
- Divide by 12
Complete the first three columns for each irregular bill you have. Then divide each amount due by 12. This is the amount that you need to set aside each month to prepare for that bill.
How it works
For example: Your roadside insurance usually costs $200. Divide the $200 by 12. That’s $17.00. So each month you’ll set aside $17 for your Roadside Insurance. When you receive the bill one year from now you’ll already have the money available to pay for it. No surprises and no painful cut into the rest of your budget that month.
Trust me, this is a big deal! It feels so good to not have to scrimp for the rest of the month when one of those irregular bills shows up.
By the way, for some people, having that extra $17 a month in the bank account, which slowly accumulates to $200 when that 12th month rolls around is difficult.
They want to spend that money because it’s just sitting there. I mean, it’s so easily available. Don’t do it! It will be worth the discipline when you experience the peace you feel when you can readily pay the bill.
Irregular Bills Savings Plan Account
A better option for most people is to have a second account to put those funds in. You can open an Irregular Bills Savings Plan account – a savings account that you put that money into it each month so that it is not so readily available. You could automatically transfer those funds into that savings account each month.
Many people like the online banks for this type of account. You can have the money automatically deposited to that savings account each month. That gives you the confidence that the funds will be there when you need them.
Just add all of the divided by 12 totals together and have that money automatically transferred into the savings account each month. Then transfer to your regular account just the money you need to pay each irregular bill when it is due.
Tip: Don’t get a savings account that charges you a fee. There is no reason to pay a bank to keep your money. I am a stickler on this. It’s your money, you should not have to pay a bank to hold it for you. Most savings accounts, even small ones, should pay you interest.
If your local banks don’t offer a fee free savings account which pays interest, try another local bank or an online bank.
I know that this is a bit difficult to initially set up because all of your irregular bills don’t come due at the same time and they are not all due exactly one year from now. That means when you first start out you may still have to deal with the pain of some bills you haven’t prepared for. I share the details for handling this issue at the end of this post.
It’s worth it! But it does take time! After the first year, it will get easier.
This method WORKS!
I’ve been using this method for planning for Irregular Bills for well over a decade now. I even use it to plan for Christmas gifts and Birthdays.
Putting it into Action
I shared a small example above with just one bill. Let’s dig in and add a couple more bills to the list to really see how this works.
Roadside Insurance of $200 is due on June 20
House Insurance of $1000 is due on August 15
Property Taxes of $1200 are due on December 30
That means that each month you will need to set aside $17 for the Roadside Insurance, plus $83 for the House Insurance, plus $100 for the Property Taxes. That’s a total of $200 a month that will need to be put into the Irregular Bills savings account.
If you did this from January through June, when the Roadside Insurance bill is due, you will already have $1200 in the Irregular Bills Savings Account. You’ll pay your Roadside Insurance of $200 which will leave $1000 is the account.
Now, for July and August you’ll still be automatically depositing another $200 to the account. So when the House Insurance bill is due on August 15th, you will have the $1000 ready in the account to pay that bill.
Plus you’ll still have $400 in that account preparing you for the December 30th bill. For the next 4 months you’ll still be adding another $200 to the account each month. So, when the property tax bill is due you will already have the $1200 to pay it. Yay! That big bill won’t have a chance to ruin your Christmas.
You’ll keep up the same method from that point forward. Be sure to update your list as necessary when you know a bill amount is going to change or if another irregular bill gets added to your life.
Your ultimate goal is to stay on top of these irregular bills so that they can never again create havoc in a single month.
But it’s not January 1 – how do I do this?
As I mentioned earlier, I know that all of you aren’t starting this on January 1st and have your bills neatly scheduled like those above. There is a way of handling this that first year. I promise although it will mean setting some additional funds aside for several months it will be worth it. And, it will be easier than trying to pay for these irregular bills the old way – all in one month.
Here’s how it would work. We’ll use the same Irregular Bills as mentioned earlier and the same due dates. However, the starting date for beginning this Irregular Bills Saving Plan will be March 1st. That means the Roadside Assistance bill of $200 is due in 4 months. When you add that bill to your Irregular Bills List, you will need to divide it by 4 (because it is due in 4 months). That means for that bill alone, you will need to set aside $50 a month. I know that is more difficult than $17 a month, but it’s still a lot better than $200 in one month when you haven’t prepared for it.
When you pay that bill, then go back to the initial plan for a whole year. You now only need to set aside $17 a month for that bill. You’ll be ready for it next year with ease!
Now, do the same for the other bills. You have a lesser number of months to prepare, so you’ll have to set aside a little more until each bill is paid the first time. Then you can adjust your numbers to a full year.
Give it a Try – You will Love it!
If paying those Irregular Bills generally puts a damper on your funds, give this Irregular Bills Savings Plan a try for just 1 year. I think you’ll be sold on this method.
Sign up for our newsletter below and download your free Irregular Bills Savings Plan Worksheet so you can get started today.