Not sure how to budget for your once-a-year bills? They can cause a panic, especially when just one bill is into the four figures, like our property taxes or auto insurance! But let me show you how to budget (and pay) for yearly bills with a strategy I’ve used for years.
I 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 to pay 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, there have been years where we also owed the Federal government. Typically in April, I write checks that total in the mid-four figures with everything combined.
Years ago, April sent me into a panic and a scramble to find the funds.
Today, I 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.
It all started years ago when we refinanced our mortgage and were no longer required to send an escrow payment to the bank for real estate taxes and our home owner’s insurance.
With this change, I knew that I needed to be responsible for setting this money aside each month. I also realized there were many other bills that were due on a yearly and quarterly basis and I wanted to secure that money too, so I came up with my own system–a personal escrow account.
Action Steps to Budget and Pay for Yearly Bills:
1. Make a list of ALL your yearly, quarterly, and any other non-monthly expenses.
Our list includes:
- home owner’s insurance – due yearly
- auto insurance – due yearly
- life insurance – due yearly
- property & school taxes – due yearly
- sewer/trash bill – due quarterly
- I 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. Set aside that new number every month.
Every month going forward, transfer this money into a separate savings account that is connected to your checking account. When you are ready to pay a bill, transfer what is needed from this savings into the checking to pay the bill.
This savings account should strictly be your Personal Escrow Account and these funds are only to be used for the bills that you have identified in step #1. This is not an account to fund anything else–ever!
4. Update your list.
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 might 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. For ideas to find those funds, read: 25 Ways to Find Money for Your Emergency Fund
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.
Like a good spreadsheet?
My Personal Escrow excel Spreadsheet will help you determine how much money you need to set aside on a monthly basis and make your budgeting a little easier.
This spreadsheet is now included in my freebies when you subscribe to my weekly email newsletters. Subscribe HERE!
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.
Rebecca Morgan says
We use sinking funds at the bank for this. I have separate bank accounts for everything that we pay yearly/quarterly. It has helped so much since we started doing this!! Same basic principle just with separate bank accounts. It works better for me mentally to have the money stashed away separately!