Saving for Periodic Expenses

One of the trickiest aspects of establishing and implementing a budget is managing periodic expenses. These are things you don’t pay monthly, but that you expect to spend a specific amount on each year. The challenge is finding a way to set aside money monthly so you have it when it’s time to spend it.

Periodic expenses can vary depending on your situation, but there are some common ones that most households have. They include semi-annual car insurance premiums, basic car maintenance (like oil changes), vacations, gifts (especially Christmas ones), clothing, electronics, furniture and non-consumable household goods, subscriptions, and memberships.

Photo credit: Cheezsy

Creating an Allocated Savings Plan

My husband and I have a system that has worked incredibly well for us that I’d like to share. We call it our allocated savings plan, and the only tools we use are a spreadsheet and a savings account that’s linked to our checking account, but separate from our general savings account. It’s like having a set of digital piggy banks for our periodic expenses.

When you create your household budget, include in it a specific dollar amount that you want to save in each category of periodic expenses. Figure out the amount to save each month by estimating your annual expenditures and dividing by 12. For example, we like to set aside $900 each year for traveling. That’s $75 per month in our budget.

After going through each category, you should have a monthly allocation for each category, along with a total amount you plan to allocate each month toward all of the categories. You’ll put all of your allocated money into a savings account each month. The account’s sole purpose is to hold the money you’ve allocated but haven’t spent yet, ensuring that you have it when you need it.

Tracking Allocated Savings

Track how the money is allocated in a spreadsheet. List each of the categories down the left side and the amount you will allocate for each one in the column just to the right. List the months across the top of the spreadsheet.

Set up a simple mathematical function that fills in all of the boxes by adding the monthly allocation to the previous month’s total in that category. Extend this formula across all the months, so after 12 months, the amount listed should be your annual budget in that category.

Every month, save receipts to track your spending in each category. At the end of the month, go into the spreadsheet and subtract the amount you spent in each category from the total amount allocated as of that month. When you’re done, add up your remaining allocated funds in all of the categories to find out how much money should be in your allocated savings account. Go into your online banking portal and transfer money into or out of the account so it has the correct amount.

Tweaking the System for Your Needs

The beautiful thing about the system is that it allows you to know exactly how much you have saved in each category at any given point in time. This allows you to make informed spending decisions. If you want to spend more than you have, you can even re-allocate money from a different category to make up the difference.

So, that’s our system for allocating savings for periodic expenses. Do you think the system would work for your household?

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  • i liked your site  and your beautiful article yes it really necessary for every person to make savings periodically.the point that you explained is really thought provoking