Home monthly Budget - non-monthly bills?

[Cralis]

Hi all,

I'm trying to build my home budget to try rectify my wrongs of the past.

I've never done a budget, am am trying to give it a bash now. But, I am stuck with how I handle a monthly budget, in conjunction with non-monthly bills (Annual, Quarterly..)

Lets say I have an annual payment of $1,200 to 'MySuperInsuranceCompany', for Car Insurance. I associate payments to this to my 'Motor Vehicle: Insurance' Category/Sub Category.

I am doing a monthly budget.

So, I thought I would divide the annual payment, into monthly amounts (Therefore, $100/month), so I then have a monthly budgeted value of $100 towards Motor Vehicle: Insurance. Therefore, every month, $100 is allocated towards the 'Motor Vehicle: Insurance' category.

Let's say, I pay 'MySuperInsuranceCompany' in December. So, Jan to Dec, I have a budget value of $100.

However, as I only pay it in December, all other months, my budget says I am $100 in the green, as I don't make any payments towards that category.

And then suddenly, in december, when I make the payment, it will reflect as $1,100 in the red (Payment of $1,200, less the budgeted allowance for that month).

Is that the only way to go, or is there a better way to handle budgets when doing monthly budgets for non-monthly payment? Same goes for things like my electricity bill, which is billed quarterly.

Hope someone can give me a way to do this. Budgeting $1,200 every December, doesn't seem right, because I have this massive bill, and as my Income for that month is the same as all the other months, I'd need to reduce a whole lot of other budgeted categories to handle this massive payment. I want to spread the load.

[disneysteve]

What you should be doing each month is "paying" that $100 into an account dedicated for that purpose so that when the bill comes in December, you have the money ready to pay it.

You don't literally need a separate bank account for every bill, of course. Some online banks allow you to set up sub-accounts all within the same account, so you could have a sub-account for the insurance bill, one for the electric bill, one for car registration, etc. Each month when you deposit $100 into that account, you would designate that it is for the insurance sub-account.

If your bank isn't set up that way, just do it on paper (or computer) to track your progress for each category that you are saving for.

[Cralis]

Thanks Steve.

That sounds pretty valid then. I guess I could have a Savings Account, and then every month, I transfer, I transfer $100 to my savings account, categorized as "Motor Vehicle: Insurance", which would reflect as a 'Payment' in my budget sheet. The actual payment it's self, doesn't reflect in my budget sheet, as it's from my 'Savings' account, to 'MySuperInsuranceCompany'.

Seems like the best plan there.

[marvholly]

Like Steve said: I have set up one separate savings account. Every month I transfer 1/12 my non-routine BIG bills (real estate taxes, car insurance, home insurance, estimated taxes) to that account. The money is there when the bill comes. I do not worry about little bills like water at about $40/quarter.

[Cralis]

Thanks marvholly - I have a spare savings account that I'll probably do this with. The system that I am using (Not YNAB) is basing my budgets on categories, and transactions. So, if I do a transfer to my savings account, and it's part of a specific Category/SubCategory, then it will hopefully record it against that budget. I'll give it a try.

[Cralis]

Another one. How would you handle something like, going to the cinema? I budget on going once every two months, and that costs $30 every two months. So, do I budget as $15/month, and put that in a 'savings' bucket as well?

[marvholly]

Another one. How would you handle something like, going to the cinema? I budget on going once every two months, and that costs $30 every two months. So, do I budget as $15/month, and put that in a 'savings' bucket as well?

For regular but not standard weekly or monthly small expenses (anything under a set amount - me=$50) I would go with a modified envelope system. Take the allowed money in cash every month. Put it in an envelope and pay the expenses as they occur out of the envelope. When the money is gone it is GONE & no more can be spent. You can do the same with clothes, household stuff like furniiture, lamps, computer ink..........