Handling Occasional Expenses: What Works For Me

I believe that our personality can play a lot into how we handle our money. Some of us just have a natural talent for crunching numbers and an attention for detail. What about the rest of us free spirits? Now, I will be the first to admit that having a spontaneous personality is not an excuse for accepting bad behaviors. We can all learn and benefit from developing healthy habits. However, if you just constantly struggle with handling an area of your money, then stop fighting.

I have been living on a monthly budget for quite awhile, and it really started out of necessity. Seven years ago, I launched out into the self-employment world and discovered quickly the highs and the lows. Budgeting became an absolute essential. One area that has plagued me for a long time is handling the occasional expenses that I did not plan for ahead of time. This is different than an emergency fund. We have an emergency fund in place but I try to not use it unless I really need to. The emergency fund has become a safety net for me so I usually do everything possible to try not to tap into it.

What really plagues me is the occasional expenses that show up every month such as: $150 for summer basketball camp, a sudden Saturday outing in which the whole extended family is going (so you have no option), school yearbooks for the kids, a field trip, $80 registration for soccer league, $150 yearly termite treatment, and the list goes on. It seems like there are at least 1-3 things every month that come up which I never saw coming. This aggravates me to no end. Am I alone on this? Partially because I budget monthly and really try hard to think of what is coming our way in the next 30 days.

Some super organized people just have all of this planned out. They take the $150 termite treatment and divide by 12, setting aside $12.50 a month. I am sorry that is just not me. I have tried…believe me I have tried. So, I decide to just give up recently. Instead, I have adopted a simpler plan. This might not work for everyone, but if I have been speaking your language so far, then keep reading.

1. Set-up an Occasional Expense Fund

I opened up a separate checking account with the same bank. The reason I choose the same bank is so that I can easily transfer money when needed. I requested a debit card for me and my wife. We had to put some initials on the back of the cards so we would not confuse it with our regular checking account. I initially placed $500 into the account in order to have it fully-funded. You could view it as a mini-emergency fund if you wanted. We do follow the envelope budgeting system and carry a little bit of weekly cash with us. We decided to not carry cash for this fund for a few reasons. First, we wanted to have immediate access to the full amount if needed. To put $500 in an envelope and then decide who is going to carry it and watch out for it was too much of a hassle. Secondly, we wanted to have check writing and debit card privileges when needed. Lastly, we are not going to regularly fund this category like we would gas, groceries, or entertainment. We would only replenish it once a month if monies were used.

2. Hassle Free Use of Occasional Expenses

Instead of pulling my hair out because I did not see the $80 soccer league registration coming, I just use the occasional expense fund. I do not have to fret with deciding which budget item to put into the red. I also do not have to dip into my emergency fund. It is the perfect cushion between the two. Now, we do have some rules in place. One, we do not use this fund as blow money. We are still careful about dipping into the fund. Second, we ask ourselves “Are we using this on a regular basis for something that should be in our monthly budget?” This provides a safeguard for us.

3. Replenish the Fund Monthly

At the end of the month, we look to see what are balance is for this account. We are following the Dave Ramsey plan and are on Baby Step #3. If you are familiar with the plan then you know the step encourages you to expand your $1000 emergency fund into 4-6 months of monthly expenses. At the end of each month we take the extra amount and replenish the occasional expense fund before adding to the emergency fund. For example, let’s save I have $500 to put into savings. I look to see that I spent $150 in occasional expenses that month. I will then place $150 into the occasional expense fund to get it back up to $500 and then add the remaining $350 into the emergency fund. The main reason I like to do this is because it really keeps my honest about how I use the occasional expense fund. I am taking from my goals so it better be a real, legitimate occasional expense.

I hope this is helpful to you. This has been revolutionary for me and my family. If you are not among the super organized then I encourage you to try this method and see how it works for you.

How do you budget for occasional expenses?

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  1. bondChristian

    Excellent, straight forward post. These are the budget killers, the reason so many people say budgets don’t work… but with a simple system, these expenses don’t have to break anything.

    -Marshall Jones Jr.

  2. Great post!

    I recently wrote about keeping at least a $500 cushion in your checking account for such emergencies. I think that doing this will go a long way in securing our budgets!

  3. Reasonable

    My husband and I were discussing this very issue this weekend. Our occasional expense was a well-needed new cell phone. Great idea setting up a separate account (I’m a fan of keeping money in separate places, that’s the OCD kicking in).

  4. Freeware Catalogue

    Great idea which I never think about it. No there are no reasons why budget can’t work….

  5. Kimberly @ Card Hub

    This is a very good idea. I like the idea of having a mini-emergency fund for those things you just don’t think about ahead of time. I have these kind of expenses every month too – not technically an emergency, but unexpected nonetheless.

  6. Cheryl

    Great article! Being a Dave Ramsey fan myself (we are edging onto Step 3 soon), we are trying to figure this very thing out as well! Our expenses become things like you mentioned as well as the occassional doctors visit (we have a very high deductible).
    Most of the annual things that come along, we have planned as you first mentioned. For example, it costs about $500 ish a year for the dog (annual visit, shots, heartworm pills and flea/tic treatment for the year), so $10 week goes into an account for that. Our 2 car registrations and potential car repairs each year (2 old cars!) come to about $2000 a year. A set amount per week goes into a “car” account. This has worked wonders for us as car repairs used to come out of the emergency fund, so paying off debt was put on hold to build it back up. It took a few times for us to realize that our emergency fund was actually a car repair fund! So we created a specific one.
    However, the other things, like the outings, fixing something that broke in the house (but is not an emergency) and the like, are truly budget busters and producers of guilt (should we shouldn’t we….what about our “plan”)…I think the way you have set it up could be considered what Dave Ramsey refers to as a “Blow” category…you know it’s going to go, so plan for it! And by keeping it funded, it takes the stress out of the unexpected!
    Again, great article! Thanks!

  7. GHolmes

    Having kids I can totally relate. We do something similar (copying someone else’s idea) we budget money monthly into a separate account titled GOK (God only knows). An opportunity fund.

    What we titled an GOK “opportunity” is if it comes up in the monthly budget plan and we can’t adjust our budget to cover it. Some times it is an opportunity for you kid to play sports and need the cleats, shin guards, socks and then there are the fund raisers. Fund raisers are usually a surprise. 🙂