Author Topic: Where do you put your budgeted expenses?  (Read 4071 times)

captainawesome

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Where do you put your budgeted expenses?
« on: December 23, 2013, 07:53:19 PM »
Just curious where other people put the money they budget for annual expenses (house repair, car maintenance, pet expenses, clothing replacement etc.)  In theory I have all of these sorts of things budgeted in every month, but I'm not going out and getting an oil change or brake replacement every month, or replacing old articles of clothing/shoes maybe but twice a year.  And we already replaced the HVAC and hot water heater in the last year, and I remodeled the kitchen when we moved in (so I really don't intend to replace any of those) Does anyone have a separate account you dump these expenses into? Or do you stop budgeting for that sort of thing and just build your "emergency" savings up once and just pull from it when you need it?

We are really fortunate in that we currently don't have any debts beyond our mortgage, so at the end of the month when I have the money for this stuff left over I always wonder what I should do with it.  I currently use a separate checking account for "bills" and transfer money from our primary checking to that account when we put recurring expenses  (utilities, gas, groceries etc) on our rewards cards.  I just don't want to throw money into a checking account and essentially lose that money every month to inflation.  Should I not budget for it every month and when these expenses come up, just save less that month?  Open to suggestions. Thanks!


hoodedfalcon

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Re: Where do you put your budgeted expenses?
« Reply #1 on: December 23, 2013, 08:05:58 PM »
I was just about to post a variation of the same question, not so much about known annual expenses (the money for those just builds in my checking account until I need it), but about the money I have budgeted for major expenses I know are potentially coming, but could be years down the road. Money for a new roof, "new" car, emergency vet bill, major house/car malfunction, etc. Right now I have it all lumped into my emergency fund, even though they aren't technically emergencies. I was wondering if I have another separate "major expense" fund in addition to the efund?

I am curious to see the other responses. Thanks for asking the question!

kaetana

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Re: Where do you put your budgeted expenses?
« Reply #2 on: December 23, 2013, 08:11:04 PM »
I use a budgeting software called YNAB (You Need a Budget). I know some people on these forums don't believe in budgeting, so your mileage may vary, but it's the only way *I* could live. I do budget for less frequent expenses every month. I find it's a lot less stressful to get a bill and know I already have the money set aside for it. Another thing YNAB teaches (it's a methodology, not just a program) is that when you're using it, you should look at your category balance, and not your bank account balance. That way you don't see all the money in your account and feel the itch to spend it-- that money is safely tucked away, earmarked for another purpose. YNAB doesn't care WHERE your money sits, as long as it's available for use when you need it. I personally keep money I'm not using monthly just in the same checking account I use, just because it is an offset account so money we leave there decreases the interest we pay on our mortgage, but you could easily just have it in a savings account and transfer it over when necessary.

Bruised_Pepper

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Re: Where do you put your budgeted expenses?
« Reply #3 on: December 23, 2013, 09:04:52 PM »
I calculate the total amount of once a year expenses that I have (subscriptions, a modest vacation, Christmas spending) and divide it in 12.  I save it up a month at a time and deposit it in my second checking account.  <- I use PNC Bank, and their big thing is "Virtual Wallet", a detailed online banking interface.  A Virtual Wallet comes with a checking/debit account, a secondary checking account (presumably for short-term savings), and a savings account.  When you put money in either the second checking account or the savings account, you can allocate it to certain "items".  I call one of mine "Yearly Expenses" and put the money there.  This would be incredibly easy to do even without the online banking interface.  A spreadsheet system work work just fine, but it's easier to let the Internet do it. 

twbird18

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Re: Where do you put your budgeted expenses?
« Reply #4 on: December 24, 2013, 07:57:45 AM »
I budget for infrequent/annual expenses by totaling them & dividing by 12. I have that monthly amount automatically withdrawn on payday (I get paid monthly) to a Capitalone360 savings account - not my normal bank. So I don't pay much attention to that balance & just withdraw from it when I need to pay one of the expenses. This also has the benefit of being my fast emergency cash if something happens while I round up the real emergency money from places that take 2-3 days to access. Our infrequent expense are kind of high due to having propane & things like collectibles insurance to account for so that balance is usually a couple thousand dollars of easily accessible money.

Cyrano

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Re: Where do you put your budgeted expenses?
« Reply #5 on: December 24, 2013, 09:22:38 AM »
I start with a best guess at the year in which the expense will occur. For large unpredictable expenses, I add a contingency plan for how I will pay for it if the expense happens sooner than the best guess. For example, if I have to replace the car before the car replacement fund is fully funded, I will replace the car using whatever funds are in the car replacement fund, getting an older vehicle as needed. If I have to replace the roof sooner than expected, I will supplement the roof replacement fund by temporarily drawing down the emergency fund.

Once everything has a year, the estimated year determines where it goes. Less than 2 years out: best bank account you can find. 3-10 years out, best rate on a CD or target date bond fund that matches the expense's estimated duration. Longer than 8-15 years out (how long depends on your risk tolerance), invest in a stock index fund.

paleogirl

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Re: Where do you put your budgeted expenses?
« Reply #6 on: December 24, 2013, 09:49:36 AM »
I don't have too many expenses because I don't own a house, so I put a small amount aside into a high-yield savings account for my semi-annual car insurance fee and other car-related expenses into a "sinking fund". I also put aside a small amount into a Betterment account for trips in the future ...

vespito

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Re: Where do you put your budgeted expenses?
« Reply #7 on: December 24, 2013, 10:13:12 AM »
I just keep it in my checking account.  Given the low interest rates, I'm not too interested in moving it in and out of different accounts.  I've looked into putting some of this into a money market account, but I think the difference in interest rates may yield me an extra dollar or two over the course of the year - so not worth it to me.

In terms of 'how do I account for the money', I use YNAB.  For 2014 I took the monthly average of all my categories over 2 years, deducted 5% (lifestyle deflation) and then used that number as my monthly budget forecast.

Charlotte

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Re: Where do you put your budgeted expenses?
« Reply #8 on: December 25, 2013, 04:12:53 AM »
We keep extra $ in our checking account as a float. The month that expenses come due we pay them and just save less at the end of that month. (Except for property taxes which are kind of high. So we put aside money every month in a simple savings account).

chasesfish

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Re: Where do you put your budgeted expenses?
« Reply #9 on: December 25, 2013, 05:53:38 AM »
I am of the mindset of Keep It Simple Stupid...

I have a large line item in my budget called Taxable Investments/Car/House/Vacations and its basically the difference between what I earn and what the other normal monthly expenses are.  I usually have something that comes up that takes a chunk of that money every month, especially with DIY house improvement.  However, I don't often use it all and transfer the remainder to the brokerage account.

Every once in a while I'll have to transfer money the other way, like when I replaced two undersized 20-year old HVAC units that were never going to keep up with Atlanta summers.