How to Budget for Periodic Expenses

When you’re filled with the optimism of a shiny new plan—the thing that’s surely going to help you get your life together once and for all—budgeting seems like a fairly easy endeavor.

You just buy a new notebook or planner, several very nice pens in different colors, some Post-it notes, maybe some stickers, whatever other cute stuff is hanging out in the office supply section, and then you write down your monthly expenses: the rent or mortgage payment, your cell phone bill, the electric bill, car payment, some groceries, etc. You make sure it’s less than your monthly income and voilà! You’re budgeting.

And then your Amazon Prime subscription renews—okay, dang, forgot that was this month.

And then your car needs new brakes—bad timing, but not exactly something you can put off.

And then the holidays roll around again—geez, that snuck right up, feels like we just did all of that last year.

And then it feels like maybe you should just wait for a “normal” month to get fully on board with budgeting. Life’s just too chaotic right now.

Take a deep breath and repeat after me: there’s no such thing as a normal month. I know, it hurts. It’s not right and it’s not fair. However, it IS possible to smooth those ups-and-downs out (financially, at least) with a budget. The key is to be proactive about managing periodic expenses.

These are the expenses that don’t occur monthly but still make a regular appearance in our lives. Think annual insurance premiums, property taxes, or even that dreaded holiday gift extravaganza. By acknowledging and planning for these expenses in advance, we can avoid the budgetary equivalent of a rollercoaster ride.

What is a Periodic Expense?

There are generally three types of expenses:

• Fixed expenses are the bills where you make monthly payments that are always the same amount, like your mortgage, car payment, streaming subscriptions, or phone plan.
• Variable expenses have a cost that changes month to month. Examples of variable expenses include food, utilities, transportation, or entertainment.
• Periodic expenses, or non-monthly expenses, pop up every once in a while. Examples of periodic expenses include your car registration, an annual membership, tuition, school supplies, birthdays, or insurance premiums.

Periodic expenses are the natural predator of many monthly budgets. They have a way of sneaking up on us, although they’re almost always something we knew would happen eventually. We just hoped they’d happen at a better time. And although you can’t always choose when periodic expenses happen, you can make choices that will make it easier when they do.

How to Budget for Periodic Expenses

Okay, back to the new-and-improved version of your shiny new plan. Here’s how to add periodic expenses to your monthly budget:

Step one: Identify the periodic expenses lurking in the shadows. Yeah, they’re out there, just waiting to pounce and force you to rack up some credit card debt or mourn the loss from your savings account. But this time you’ll be ready. Take a few minutes to review your past bank statements and bills to seek out those sneaky non-monthly expenses that keep catching you off guard. Highlight them, circle them, or even add some festive stickers—don’t let them go unnoticed though. Check out this list of variable costs and non-monthly expenses that you can use for inspiration in your search.

Step two: Calculate the total cost of each periodic expense. Break out your trusty calculator or use your magical budgeting app to add up the cost of each expense over the course of a year. If an expense occurs quarterly, multiply it by four; if it’s biannual, double it. This gives you the annual cost of each expenditure.

Step three: Bust out your budgeting superpowers and create a sinking fund. Now that you have the annual cost, divide it by twelve to get the monthly amount you should set aside. This monthly amount becomes your sinking fund—the superhero cape that rescues you from the financial stress of periodic expenses. You’re transforming that scary, often unpredictable expense into a much more manageable monthly bill. This is also the second rule of the YNAB Method: Embrace Your True Expenses.

Step four: Celebrate! You’ve just unlocked the secret to conquering periodic expenses like a boss. Give yourself a pat on the back, dance a little jig, or do whatever makes you feel like a budgeting champion. Just create a budget category for each periodic expense and assign your predetermined amount to that category each month. (The target feature in YNAB makes that part easy.) Once that periodic expense pops up, you’ll have the extra money on hand to pay for it. And you can celebrate all over again.

Remember, periodic expenses don’t have to be money monsters—they can become your financial allies. By embracing their existence and preparing for them in advance, you’ll end up effortlessly navigating the twists and turns of your budgeting journey and you’ll easily meet your financial goals along the way.