We all have expenses that don’t neatly fit into a monthly budget — memberships, insurance bills, taxes, and a miscellany of various items.  In order to never be surprised by recurring expenses, we have to find a way to plan for them.  For us, using an annual budget in addition to our monthly budget has really smoothed out the impact of these items.

This is the list of everything on our annual budget:

$26  Lastpass (password management and security)
$60  Costco Membership
$60  Tax Prep Software
$100  PO Box (for quarantining mail for batch processing)
$106  Amazon Prime (which replaces Netflix and Pandora)
$140  Umbrella Insurance
$192  Cell Service (for 1 of us for a full year with Mint Mobile – the other has cell service covered outside of our family budget)
$192  Garbage (billed quarterly)
$200  Dental Cleanings (one for each of us every year)
$200  Dog Shots & Heartworm Medicine
$200  Termite Bond
$240  Car Tax (our state charges property taxes on cars)
$240  House Cleaning (this is an annual splurge – we hire pros in to really make the place shine, usually before family comes and visits)
$300  Vehicle Maint. (oil changes, tires, etc.  some years are higher, some are lower)
$500  Property Taxes (yes, that is the full annual property tax bill on our 3 bedroom home!)
$750  Homeowners Insurance
$780  Water (billed every other month)
$910  Car Insurance
$1560  Yard Maintenance (OK, the hardcore frugals will hate this, but man it frees up so much time and cognitive overhead for us that it probably pays for itself in side- hustle income.  It’s a big yard and this is a great deal when we think about it in terms of the value of our time.)


Total = $6756 each year.

Now if I divide that by 12 I get the monthly cost of these annual expenses, which is $563.

So I just add that into our monthly budget by moving that much every month from checking (where all our income arrives) into a high-yield savings account. I opened a new account reserved just for these expenses (which I have creatively named the “Annual Expenses Account”).

Whenever we pay one of these expenses, I just move that money from the Annual Expenses Account into checking to cover the cost.

The first year I did this it required some reconstruction of the expenses from prior years, but after that it became very easy and accurate.  Whenever we pay this kind of expense, I record it separate from the monthly budget, adjusting the amount up or down as bills change.

So now, no more surprises, no forgotten bills, no depleting emergency funds, etc.  We know exactly how much we need to save each month to cover these costs and can plan it in to our monthly budget!

One thing you might notice is that we do not budget in holiday money.  Why?  Well, the honest answer is that we pretty much eliminated it from our budget.  Our monthly budget has a set amount that we put into a “fun fund” and we can buy gifts or take trips out of that.  But we no longer dedicate money to things like Christmas (which we know is much easier for us, not having kids).  If you do find a holiday always creates a big expense for you each year, you could build that in here as well, of course.

What system do you use to budget for these kinds of expenses?  Do you have a special way you track them or save for them?  I’d love to hear from you!