Welcome to 31 Days to Organize Your Finances. By the end of the month, my goal is to help you have a detailed financial plan for your family. We’ll talk about cash flow, budgets, debts, and all of the nitty gritty of our finances that might not be fun to talk about, but are so important to discuss. Please refer back to the original post for a complete list of daily assignments.
Do you go into panic mode when your car insurance bill arrives? Does your property tax bill give you anxiety?
That used to be me. Our homeowners insurance and property taxes are not tied in with our mortgage so we receive those bills and are responsible for paying them instead of the bank that owns the mortgage. In the past, when I would receive those bills in the mail, I would go into a complete panic. How were we going to find the funds by the due date? It was a horrible feeling.
I don’t handle life well when I feel like I’m living on the edge of a cliff, so we made a change.
Today’s Assignment: Create a Personal Escrow Fund for ALL of your non-monthly expenses.
Get out a piece of paper and make a list of all your yearly, quarterly, non-monthly expenses. Our personal escrow fund includes:
- home owners insurance – due yearly
- auto insurance – due yearly
- life insurance – due yearly
- property & school taxes – due yearly
- sewer/trash bill – due quarterly
Add up your list of bills and divide that total by 12. This new number will become a line item on your monthly spending plan.
Every month, we transfer this money into a savings account that is connected to our checking account. When a bill comes due, I transfer from the savings into the checking to pay to bill. Panic no longer overcomes me.
This savings account is strictly a Personal Escrow Fund and is only to be used for the bills that you have identified for the fund. This is not an account to fund anything else–ever!
Keep in mind that it will take you time to build up the funds, so if you start the fund in October and a bill is due in November, you most likely will not have enough money in your fund yet. Don’t let that deter you. This worked very well for us once we started regularly transferring the money every month.
How do you pay for your non-monthly expenses? What are your non-monthly expenses? Do you have a fund like this for those bills? Will you start one? Let us know in the comments.