The best way to budget for non-monthly or irregular expenses

How are you supposed to budget those yearly expenses into your monthly budget? Monthly bills are easy to plan for and it’s awesome when you have your monthly expenses all organized into a smooth-running budget. You set up automatic deposits for your paycheck and automatic withdrawals for your bills. It runs seamlessly. You know what to expect.

But then the car registration is due. And the cat has to go to the vet for his yearly checkup. And your membership to Costco/Amazon/whatever goes through.

How do you work those irregular, non-monthly (but expected) payments into your budget?

First, get a general idea of what kind of expenses pop up in your finances in any given year. These are the things you know are coming, but only happen a few times a year. The best way to get a solid total number to work with is to look back through your transaction records on your bank or credit card statements. Make a note of the non-monthly, regular payments that you expect to happen every year. Sure, you can’t plan for everything, but knowing what you paid for school supplies last year can help you prepare to pay at least that much in the budget for this year.

Then, total up all those recurring expenses. Surprised at the total? Yeah, no wonder your budget gets out-of-whack throughout the year. How can you not be impacted by the cost of a new tire set?

The next step is to divide that yearly total by 12 (you see where I’m going with this, right?) and start putting that amount aside every month. Your bank probably has an easy way to set up a secondary savings account (or sub-account) that you can direct deposit into every time you receive a paycheck. The reason to set this into a separate account is so it doesn’t just get rolled into general bill paying. This extra bill paying account is not meant to take the hit for fluctuating monthly expenses. If you are tempted to dip into this extra bill pay account to cover your regular monthly bills, definitely look for why your monthly account is not enough to cover your regular bills and adjust accordingly.

Note: if you know you have a big yearly expense coming up in a few months, you may want to go ahead and break that amount into fewer, larger payments so it doesn’t hit so hard (while continuing to put away the 12-month total, ideally). Let’s say you know your car registration is $800 and is due in 4 months. Go ahead and put aside $200 a month ASAP, as well as the $50 a month you will need for next year’s payment.

Yes, it’s going to take time to build up that account to be able to pay everything out of it. But the stress over your budget will be so much better when these ‘unexpected expected’ payments are planned so they don’t throw you for such a loop.

(Want a great way to plan for and track all your payments and financial accounts? LegacyVault has a secure way to manage all of this information with an easy step-by-step process to input your info and accounts. It’s the last place you will ever need to log this information—your Vault is undeniably safe, incredibly secure and long-term.)

Conquer financial goals with a debt-free chart

According to a recent CNBC study, 8 out of 10 Americans are in debt. The most common source of debt for Americans is a home mortgage, which isn’t necessarily considered bad debt, but nearly 40% of us are carrying significant credit card debt, too. With the revolving nature of credit card debt and its high interest rates, it can be hard to get out from underneath it. As common as it is, no one wants credit card debt and the first thing we usually think about when we set financial goals is: how do I get out of debt?

Getting out of debt can seem like an overwhelming task.

Debt, especially credit card debt or ‘consumer debt’, is usually an indication that we are living beyond our means. As we try to understand our debt load, we often don’t have a very good idea of what our financial status actually is and where to begin. Plus, unless you throw a big chunk of money at a specific debt, it’s hard to see any progress month after month on getting those balances down to zero. This is how the debt cycle continues and why it can be hard to change our financial situation.

But setting a financial goal to get out of debt is the same as setting any other kind of goal—the goal must be specific, measureable, achievable, relevant and time-bound, in other words, S.M.A.R.T.

How do you set S.M.A.R.T. financial goals?

1) Know where you are at, financially speaking.

This can be the hardest step because you may have been avoiding knowing how bad things really are. However,  it’s critical to understand where you stand. So bite the bullet and gather all the info on your financial situation—debts, expenses and income. Gather it all up and write it down in one place so you have a clear view of exactly where you’re at.

(If you’re looking for a secure, comprehensive place to put all your financial information, including accounts, debts, and assets, check out the Financial Planner section of LegacyVault. There, you can put all the information in at one time, have access to it from anywhere and never lose track of your financial situation again. That’s pretty smart, right?)

2) Get a plan.

Once you have a handle on things, it’s time to push up your sleeves and get to work to come up with a reasonable strategy to get out of debt. Luckily, there are a ton of resources to help you out. From blogs to books to training systems—don’t be afraid to get the help you need. Getting (and staying) out of debt will probably require skills that you don’t currently have (because otherwise, you would have done it by now).

To get those skills and cultivate new ways of thinking, be honest about what is hard for you when it comes to finances and fill in those gaps with knowledge. Some great resources include A Bowl Full of Lemons, a website that has handy printables and steps for following the hugely popular get-out-of-debt plan designed by Dave Ramsey, and a workbook program to build a budget at Busy Budgeter.

If you bring it back to S.M.A.R.T. goal planning, one of the most vital tools is a debt-free chart. It’s a great tool that provides a visual of your progress as you pay down and pay off debt. With the sometimes small steps that are a normal part of getting out of debt, the debt-free chart helps you see that you ARE making progress. It also helps you create specific goals (the debt you want to pay off first, next, etc) and helps create a measureable, specific timeline.

Getting out of debt and out from under the crushing stress is worth the time and effort to follow these simple steps.  You CAN get out of debt—get the tools you need to start digging your way to being debt-free.

 

5 must-read books on personal finance

There’s nothing like seeing that total on your tax forms to make you re-think your personal financial plan. Or, if you’re like the one-third of Americans without a financial plan (according to a study by Northwestern Mutual), perhaps this is a good time to come up with a financial strategy.

Not sure where to begin with getting your personal financial house in order?

It can be a bit overwhelming to get up to speed on your situation—finding and consolidating all those documents and tracking down accounts and putting it all in one spot so you can get a good look at where you are. Yes, it’s going to be some work upfront to get it all together, but avoiding it will not make it better. Let’s be honest, your financial situation will only get more complicated, so best to get a handle on things now.

Knowing your financial situation is an extremely important step in determining if and where you need to make adjustments in your life. Once that’s taken care of, you’re going to want to have some sound advice to get on (or keep you on) the right track. There are a ton of resources on personal finance—a truly incredible number aimed at everything from getting out of debt to how to think about money to taxes to retirement planning.

It’s exhausting. Trust us—we googled it so you didn’t have to. But what we did find are some resources about personal finances that are well-respected by both experts and us regular folks.

Here are 5 must-read books to help change both your thinking and your knowledge about money:

 

  1. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!, by Robert Kiyosaki  – This is one of those books that messes with your mind about money at the core of what you believe and draws a connection to how you act as a result. You’ll learn why the rich think about money differently and why their financial situation is different as a result. It’s written clearly and in a tone that is very easy to read. You will wish you had read this book sooner.
  2. The Total Money Makeover, by Dave Ramsey – Once Kiyosaki challenges your beliefs about money, Ramsey is going to give you a solid plan on how to actually manage your money. This book is like having a personal trainer to help you develop a solid, healthy strategy to get out of debt (and stay out of it), stay on budget and develop a strong savings plan. It’s a swift kick in the pants and shows you how to make those hard daily decisions about money. Just like any good fitness routine, it’s going to hurt, but you’ll love the results.                                                       
  3. The Intelligent Investor, by Benjamin Graham – It was originally published in 1949, but it’s still held as one of the best books on investment today. Now that you know how to think about money and have a healthy budget (thanks to Kiyosaki and Ramsey), you may be looking for ways to increase your income. This book has newer editions with commentary by the likes of Warren Buffett so you can be sure you’ll get a solid look at the world of investing. It’s comprehensive and directed at the person just learning about and getting started with investing.
  4. The Bogleheads Guide to Retirement Planning, by Taylor Larimore, et al – Based on the financial wisdom and strategies of investor John C. Bogle, the Bogleheads lay out a clear plan of how to save, where to save and how much to save for retirement. Regardless of your present financial situation, you can make progress for a financially secure retirement and this essential book shows you how, especially if you are new to investing. It’s a great resource for both young people and folks closer to retirement.
  5. J.K. Lasser’s Your Income Tax 2018: For Preparing Your 2017 Tax Return, by the J.K. Lasser Institute – Since this all started when you looked at your tax return, we wanted to provide a book about taxes and discovered that people raved about this one. This series of books is published each year with updated tax laws and information for filing federal taxes. You may not have heard of this powerful and easy-to-use resource, but it is a must-have if you prepare your own taxes. It provides answers to those annoying questions, is comprehensive and helps you find deductions you haven’t thought of yet. We were a little surprised at people’s affection for it, but were thrilled that such a handy resource exists.

You know you want to be financially healthier. Just take a step. Read one (or all five) of these excellent resources and get started. Next year when you look at those tax forms, you’ll be happy you started today.

Oh, and if you’re looking for a great way to securely organize and track all your financial information—from investments to bank account info (and receipts for those taxes), LegacyVault has a step-by-step tool that can help you input all that data and access it in an easy, secure way. Check it out here.