Create a More Realistic Budget With These Rules of Thumb for Irregular Expenses
Budgeting is fairly easy if you have regular income and recurring monthly bills, but remember to plan for non-monthly expenses. NerdWallet tells us how much we should allocate for things like car maintenance and other necessary expenses.
If your car insurance is payable every six months, set aside one-sixth of your total monthly in savings reserves, the site advises, and also factor in seasonal expenses like vacations and gifts.
When it comes to servicing and replacing items (your laptop won’t last forever and your car tires will eventually need to be replaced), consider the following guidelines:
- Personal property – 2% to 4% of your annual net pay for replacement and maintenance of items
- Car and tire service – 5 to 10 cents per mile. For example, if you drive 10,000 miles a year, you should plan between $ 500 and $ 1,000 a year for car maintenance. Most of this amount will go towards short-term savings that you can use as expenses arise. But 20% should be set aside in a longer-term savings account for tire changes if necessary.
- Home maintenance and replacement – from 2% to 3% of the value of your home. About a third of that amount must be in a long-term savings account to cover the replacement of high-value items such as stoves, driveways and roofs.
- Reserve fund – 2% of your net annual salary to cover things you just didn’t think about.
Also, if you have a car payment, once you’re done with it, start investing some or all of the amount you spent each month in a car replacement fund.
This will help you create a more realistic budget and avoid unexpected billing or financial errors that can prevent you from reaching your financial goals.
Try This Budget Plan To Regain Control Of Your Money | NerdWallet