Did the holidays sneak up on you last year? Do you find yourself scrambling for cash to pay insurance premiums or car registration fees? Do copays for your annual dental and eye exams throw your budget out of whack?
If you're like many people, you forget about some of these annual expenses. Even though you know you'll have to pay them at some point during the year, they're out of sight and out of mind until you get hit with an unexpected bill.
And when you're suddenly scrambling to pay $200 for your car registration, $500 for holiday gifts or even $75 for your dental visit copay, your whole monthly budget gets thrown off. Then, you just wind up on a financial roller coaster for the entire year.
But you don't have to live this way. Instead of dealing with constant unexpected expenses, learn to expect these annual costs. Add them into your budget each month, and you'll be cool as a cucumber when those bills come in the mail.
Monthly budgeting for annual expenses
Budgeting for annual expenses when you make a monthly or biweekly budget is simple. Just divide the total expense by 12, and set aside 1/12 of the overall payment each month.
You can leave this money in your checking account until you need it, or move it over to savings for safe keeping. Having immediate access to the money when it comes time to pay these expenses matters more than where it's kept.
So to start your new year off right, go through last year's spending to find the annual expenses you need to account for. Add up how much you spent on charges that come at the same time each year, divide it by 12 and set aside some cash each month for these budget items.
25 common annual expenses
Your list of annual expenses will vary, depending on your circumstances. So you'll want to take the time to look over last year's spending. Check for expenses that came up once – or twice, if they're paid every six months – and write down the cost for each one.
Just so you don't miss any annual charges in your budget, here's a list of 25 of the most common yearly expenses:
1. Auto registration fees
2. Annual scheduled car maintenance
3. New tires and brakes (as needed)
4. Car insurance premiums
6. Holiday, birthday and anniversary gifts
7. Holiday and birthday parties/entertaining
8. Pet wellness visits and vaccinations
9. Pet tag/licensing fees
10. Copays for annual physicals, dental exams and eye exams
11. Life insurance premiums
12. Union dues
13. Professional licensing/subscription fees
14. Warehouse club membership fees
15. AAA membership fees
16. Other membership dues (local museums, zoos, etc.)
17. Annual credit card fees
18. Tax preparation fees
19. Annual home maintenance (carpet cleaning, gutter cleaning, tree trimming, etc.)
21. Magazine and newspaper subscriptions
22. Other subscriptions (Netflix, Amazon Prime, Hulu, etc.)
23. Homeowner's insurance and taxes (if they aren't escrowed with your mortgage payments)
24. Homeowners association fees
25. Taxes on side business income or interest income
The first time you decide to budget for annual expenses, it can take some time. After all, you'll need to go back over bank statements or your budgeting software for the past year to make sure you account for everything.
But it won't take long before you see the benefits of budgeting each month for annual and one-off expenses. As soon as you get hit with the bill for your life insurance premiums, or the reminder to renew your license plates, you'll breathe easier knowing you already have that money set aside.
Abby Hayes is a freelance blogger and journalist who writes for personal finance blog The Dough Roller and contributes to Dough Roller's weekly newsletter.