Now that I’ve been budgeting for a few months I’ve noticed that every month has unusual expenses. In May I had my oral surgery which was expensive and limited how much I could pay down my debt and contribute to my emergency fund. I figured that in June I’d be able to put a lot more money towards these since I wouldn’t have the oral surgery bill. However, things didn’t turn out that way. I had an unexpected car repair which took quite a bit of money. Also I had to pay for three months of health insurance when I thought I could pay one month at a time. I also had to pay my personal property tax, renew my license and registration on my car, and pay for the next six months of auto insurance. While those expenses were expected when combined with the unexpected expenses I didn’t have nearly the surplus I expected.
This month is starting off the same. I knew I would have some dental expenses but they are already higher than I thought they would be. I think I need to budget $100-$200 a month for unexpected expenses. If it turns out I don’t actually have any unexpected expenses in a month than I can go ahead and contribute that amount towards my debt or savings. I’m not sure if this is the best solution but it is what I came up with. I’d be happy to hear any suggestions any readers would like to contribute.
Is “personal property tax” the same as “property tax” on your house? Presumably your mortgage is paid off, then, since otherwise you’d pay the property tax & insurance with your mortgage payment. That’s my situation: no mortgage payment, but gigantic annual (or semiannual) gouges from the county and the insurance companies. The only way I can even hope to pay these large bills–several thousand bucks a year–is to set aside money each month.
As soon as I get my first paycheck of the month, I “pay myself” by shifting $260 out of checking into a money market savings account. This is to cover property tax, homeowner’s insurance, & car insurance. As a practical matter, it won’t cover this year’s total bill, because the county has jacked up everyone’s valuation (never mind that property values are now FALLING in this area), but because when I was self-employed I also used to put money in that account to cover medical bills, there should be enough. As soon as I find out what the property tax bite really is, I’ll know how much to adjust that set-aside.
Then at the same time I also set aside another $200 in a regular savings account. This accrues to cover “special” expenses–such as clothing or shoes now & again, and workmen’s bills that exceed my normal budget.
If you’re self-employed or your employer doesn’t offer a flex plan, then you pretty much have to build your own do-it-yourself flex plan: estimate how much your medical & dental bills will be this year, multiply by 1.5 and pray that’s enough to cover Murphy’s law. Then take that amount, divide it by 12, and set that much aside in your “special expenses” account–or better yet, in a money market savings account, which at least will give you a pittance of interest. It’s after-tax, but at least the government doesn’t take away what you don’t spend at the end of the year. If you have a surplus after a couple of years, put it in a 3-year CD. The penalty for cashing it in should an emergency arise isn’t THAT huge, and it’ll earn more than it does sitting in a savings account.
vh- Personal property tax is the property tax levied on my car. It isn’t much since my car isn’t too valuable. I think MO is the only state I’ve lived in that has the personal property tax on vehicles. But the other states I lived in had much higher vehicle registration costs so it still ended up costing about the same.
I don’t own a home. It would be nice to have a paid off house. Your budgeting plan sounds like it would work well.