You’ve been trotting along all year staying on your budget when a budget buster hits you off track. The budget buster is an item that happens once a year or even twice a year, but because it is not something that happens monthly, it is not on your monthly budget.
Budget busters are things like:
- New car tires;
- Car repairs;
- Car insurance;
- Heating or Air goes out;
- Life insurance premium;
- Property taxes;
- Property Insurance
- Health Insurance deductible;
- Unexpected medical bills;
- Unexpected pet bills;
- Household appliances needing repair or replacing.
We could go on, but I think you get the idea. So how do we account for this expense in our monthly budget? The way we do it is by taking the yearly amount of the expense and dividing it by 12. Then each month we list this item on our budget along with the monthly amount we have calculated. For example, let’s say our property taxes are $1,200 a year. How do we know this? It is because that is what we paid last year.
In our example above, we would have to save $150 a month to cover these two expenses. If you are paid bi-weekly, in order to find out how much you would have to save each month, you would need to divide the total for each item by 26.
26 pay periods
26 pay periods
As you can see from our above example, you would be saving $69.21 per paycheck. Some of you might be paid semi-monthly. If so, you would dividing the total amount per item by 24. In this way, you’ll save that amount per paycheck. Remember, to include all of your budget busters when you prepare your monthly budget. By doing this, there won’t be any surprises.