Struggling to pay those bills that just happen once a year? They can cause a panic, but let me show you how to pay for yearly bills without stressing out. I have built a monthly system to set aside money specifically for our yearly bills and while I still dread writing those large checks, I am no longer paralyzed by it.
If you struggle paying quarterly or yearly bills on time, then keep reading!
April is always a very expensive month for us. Our home-owner’s insurance, auto insurance, and local real-estate taxes (for our home and our business property) are due, and on top of that, we there have been years where we also owed the Federal government.
I have written checks that totaled in the four figures with everything combined. It is a very painful month and I might have shed tears, especially as I wrote that check to Uncle Sam.
Years ago, April would have sent me into a panic. But now, I very calm as I write out these checks.
I have built a monthly system to set aside money specifically for our yearly bills and while I still dread April, I am no longer paralyzed by it.
Years ago when we refinanced our mortgage, I started our own personal escrow account when we were no longer required to send an escrow payment to the bank for real estate taxes and home owners insurance.
With this change, I knew that I needed to be responsible with setting aside money each month. While I know things can go wrong, I missed the diligence of an escrow account. The money for those taxes and home insurance was taken care of, as long as we paid our mortgage on time.
At the same time, I also knew there were many other bills that were due once a year or quarterly and it would be nice to have that money available too. So I came up with my own system.
How to Create a Personal Escrow Fund
1. Make a list of ALL your yearly, quarterly and any other non-monthly expenses. My list includes:
- home owners insurance – due yearly
- auto insurance – due yearly
- life insurance – due yearly
- property & school taxes – due yearly
- sewer/trash bill – due quarterly
- Also include any quarterly or yearly registration fees, memberships dues, licenses, etc
2. Add up this list of bills and divide that total by 12. This new number will become a line item on your monthly budget.
3. Every month, transfer this money into a savings account that is connected to your checking account. When you are ready to pay a bill, transfer what is needed from the savings into the checking to pay the bill. This savings account will strictly be your Personal Escrow Account 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!
Using an online account, like Capital One 360, for your escrow is a good way to avoid using the money for non-escrow purposes. Use my referral link for more information on Capital One 360.
4. Every year when you get a new bill, remember to update your list and make any changes to the amount that you need to save each month.
Ok, I can hear you saying, “Kristia, you make it sound so easy!”
I get it. The first year could be tough, especially if you have never saved monthly for these bills. This system could take you up to a year to run smoothly, so if you start the fund in May and a bill is due in June, you most likely will not have enough money in your fund yet.
Don’t let that deter you. This system works very well for us, but we have been doing it for several years. It will take some time.
To get started, you might need to supplement your account with additional money until you have accrued enough to pay your bills. Read my 31 Days to Find $1000 series for ideas to find those funds.
A year might sound like a long time, but by transferring this money diligently each month, you are on your way to less stress and more calm when paying your bills.
How do you pay for your quarterly and yearly expenses? Do you have a fund like this to pay those bills? Will you start one? Let us know in the comments.