budgeting one time yearly expense

[davidbeitz]

how do you budget for a one time yearly expense like property taxes? Do you divide the amount by 12 and budget for it monthly? or do you just have it in the budget for one month?

 

[FIREmenow]

how do you budget for a one time yearly expense like property taxes? Do you divide the amount by 12 and budget for it monthly? or do you just have it in the budget for one month?

I do the former.

 

[REWahoo]

I pay property taxes in four installments and budget for each installment in the month they are due.

 

[MBAustin]

I think it probably varies from person to person depending on income streams and personal preference. For people who move a lump sum once a year from investments into a "spending" account, it doesn't really matter as long as you know it's coming and stick to the budget each month. If you move varying amounts each month/quarter depending on projected expenses, then it makes most sense to me to budget it when it's due. If you primarily rely on monthly income streams for living expenses (SS, pension, etc.), then it makes more sense to me to budget 1/12 per month so you have the $$ available when it's due. My $0.02.

 

[razztazz]

I pay those kinds of things and account for them: taxes, insurance, dog license, car registration et al, in the month in which they are due. All at once.

Likewise I pay my gas and electric bills each month based on the amount for that month. I don't do as many others, pay an average amount each month based on last year's total with a final adjustment at the end of the year if I was over or under billed.

I like knowing exactly what things are, when they are

 

[braumeister]

I plan and track spending on an annual basis. So much simpler.

 

[MichaelB]

I plan and track spending on an annual basis. So much simpler.

+1

 

[Meadbh]

I plan and track spending on an annual basis. So much simpler.

I budget on an annual basis. For the first 3 years of ER I tracked spending monthly, calculating the monthly and YTD variance. I'm now confident enough to track spending annually.

 

[Walt34]

We just plan for them as they come due and transfer the funds out of savings into checking. Normally we have a negative cash flow in the fall because that's when the bills arrive for property taxes, house and car insurance and the umbrella policy. Last year was the first year I was getting SS so we didn't have to take out as much as usual but the SS income didn't cover all of it.

 

[FiveDriver]

Our Property Taxes are due and payable in January of each year, there is no Installment Plan available. The RE Taxes are relatively low so the money is there.

My mistake was in the timing of some other big expenses in January......the Car Tax and Registration, the Car Insurance, the Homeowners Insurance and some Professional Dues. It's a bunch of little Fees that add up if they all hit at the same time. If we can make it to February.....we can coast thru the rest of the year HA !!

Looking back on it, we really should have waited to register the Cars and change over the Insurance -- everybody else that moves down here rides with Out-of-state plates.

 

[audreyh1]

how do you budget for a one time yearly expense like property taxes? Do you divide the amount by 12 and budget for it monthly? or do you just have it in the budget for one month?

I just have an annual budget, not a monthly one.

But when I look at my spending year-to-date, anything that is paid annually like various kinds of insurance, property taxes, gifts, are divided by 12 to determine my "run rate" - the YTD spending projected to total year spending.

 

[pb4uski]

how do you budget for a one time yearly expense like property taxes? Do you divide the amount by 12 and budget for it monthly? or do you just have it in the budget for one month?

We have annual property taxes. My budget is for a year so it doesn't much matter in terms of budgeting.

I take the budget, which is mostly even throughout the year and deduct property taxes and insurance, which are both just once a year, and divide the result by 12 to get my monthly transfer from my investments to my bank account that I use to pay my bills. Then, if I need to make a special transfer when the property taxes and insurance are due then I do so.

Some years I need to and some years I don't.

 

[exnavynuke]

I account for them (divided by 12) in my monthly budget so I can extrapolate that budget into an annual budget if I wanted to. However, none of them stack up or are high enough for me to bother setting aside the money each month in preparation.

 

[scrabbler1]

In my annual budget spreadsheet, I include items for all of my expenses, whether they are monthly or less frequent. I also include a monthly line for unknown expenses I can fill in later as they arise.


Also in my budget are my monthly and less frequent cash inflows, mainly monthly and quarterly dividend payments. I then sort them by date and move them into the cash flow portion of my spreadsheet. I can then see where my budget surpluses are so I know when I can invest excess dividends elsewhere. I am also careful to identify various low points in my projected checking account balances due to the "lumpier" expenses coming due before the "lumpier" quarterly (roughly) dividend payments coming in.


I always make sure to run a surplus so I can cover the lumpier expenses and smaller, unforeseen expenses, but once in a long while there is larger, unexpected expense my normal surplus can't cover. That is when I use my second-tier emergency fund ("slush fund") to cover the expense. It has been 6 years since that happened.

 

[RunningBum]

I always did it yearly, but it's your budget, do whatever works for you. There's no right or wrong, and nobody auditing you for your budget.

 

[rodi]

We just plan for them as they come due and transfer the funds out of savings into checking. Normally we have a negative cash flow in the fall because that's when the bills arrive for property taxes, house and car insurance and the umbrella policy. Last year was the first year I was getting SS so we didn't have to take out as much as usual but the SS income didn't cover all of it.

This (except the SS part).

I plan my spending for the year - so annual or semi annual expenses are part of the overall budget. Unspent money goes into savings - and is used when the lumpy expenses come along like property taxes, homeowners and car insurance, etc. If for some reason I needed more to cover a lumpy expense, I'd take more out... but would look back to see why I'd spent more than plan.. and either correct the spending plan or correct the way I spend.

I don't budget though.... I just check, periodically, to see if I'm within the overall plan for the year.

 

[karen1972]

I reset up my budget in Quicken and it looks like the new version has more options. The big items I put due in the month I'll pay them. The variable stuff I now have set up to do a monthly rollover, in the end, I park enough to cover the full years worth of expenses, but I track on a monthly basis just to be sure I'm not off track and have to plan for a second withdrawal for the year.

 

[Danmar]

I put large infrequent expenses into the months I expect to pay them. I have a lot of historical data so I generally know when these type of expenses are paid. If I have no idea when during the year they will be incurred, I sometimes divide the total amount by 12 and spread it over the 12 months. These type of items tend to be smaller and often more recurring in nature.

 

[socca]

My budgeting is for annual income & expenses only.

 

[tmm99]

I just have an annual budget, not a monthly one.



But when I look at my spending year-to-date, anything that is paid annually like various kinds of insurance, property taxes, gifts, are divided by 12 to determine my "run rate" - the YTD spending projected to total year spending.

Same here.


Sent from my iPad using Early Retirement Forum

 

[Katsmeow]

I put in the budget for the month I will actually pay it because I already have that money (well I may need to withdraw it from the IRA but I plan to do that).

If I was in a situation where I didn't have that money already and needed to save it from income coming in monthly (like from a paycheck) then I would budget an amount each month.

 

[W2R]

I withdraw my money once a year, the first week in January. That is all I get to spend for the year.

I pay once-a-year expenses like property tax in the month when they are due.

I don't have a budget, but instead look at my spending to see how I am doing and if my spending is on track, so that I will not overspend for the year. When I do that, I look at two totals that I compute at the end of each month.

(1)The actual amount that I have spend that year

(2)The same, but with property tax and other annual payments subtracted (if paid), and instead adding 1/12th of the sum of my annual expenses for each month.

 

[Mo Money]

Religiously, the former.

 

[mpeirce]

how do you budget for a one time yearly expense like property taxes? Do you divide the amount by 12 and budget for it monthly? or do you just have it in the budget for one month?

I would guess that people with monthly income, like pensions, would try to fit things into a monthly framework.

I don't have any monthly income, so it's easy to focus on a yearly budget. While I have about half my spending flowing to our checking account on a monthly basis, the other half is yearly items like insurance, property taxes, medical, travel, and a reserve fund (for big non-monthly spending). I track it yearly so that I don't go over our intended spending. Works for us.

Of course there are lots of budgeting systems that work...