Expenses that you don’t normally put into a monthly budget can creep up and cause problems with your regular financial routines. They aren’t really emergencies, but meeting these obligations is an important part of life, so coming up with extra money in a hurry can feel like an urgent need.
The thing about seasonal expenses that sets them apart from emergency expenses is that they are somewhat predictable. Unfortunately, working them into a monthly budget takes time which can make them seem overwhelming.
You can use the envelope method to save for seasonal expenses. Some people prefer to keep money for seasonal expenses in separate savings accounts. For holiday expenses, consider opening a Christmas Club account at your local bank or credit union.
Here’s a simple formula to help break down those seasonal expenses into more manageable chunks and keep them from making a mess of your monthly budget.
Amount of expense divided by number of paychecks between now and the target date.
Example for Spring Break Vacation expenses:
Amount of expense: $1,200
Number of paychecks between now and March 1, 2018: 16
$1,200 divided by 16 = $75
If you can set aside $75 from each paycheck between now and March 1, you’ll have $1,200 for your spring break vacation.
Example for Holiday gifts expenses:
Amount of expense: $400
Number of paychecks between now and December 23: 7
$400 divided by 7 = $58
If you can set aside $58 from each paycheck between now and December 23, you’ll have $400 to spend on gifts this Christmas.
Christmas Club accounts at your local bank or credit union work best if you start them early in the year. If you’d like to increase the amount of money you have around the holidays, starting in January can give your savings a boost without making a huge impact on your finances.
Example of Christmas Club savings plan:
Goal: Increase holiday budget from $400 to $600
Amount of expense divided by number of paychecks between now and the target date.
If you are paid weekly, you have about 44 weeks to save before November of 2018 if you start after the 2017 holiday season.
$600 divided by 44 = $13.65
People who save for the holidays throughout the year often find that it’s easier to give up a little bit of money from each paycheck instead of scrambling to come up with a large amount of cash right before the holidays.
If you decide to sign up for a Christmas Club account, you’ll need to determine exactly how much money you’d like to save out of each paycheck. The bank will automatically take that amount of money out of your account on the day you get paid.
Every financial institution offering Christmas Club accounts has its own set of rules. Generally, they automatically deposit your accumulated holiday money into your checking account near the beginning of November.
Saving for seasonal expenses is a great way to protect your monthly budget by setting aside a small amount from each paycheck.
If there isn’t time to save enough money, a personal installment loan may be a better option than high-interest credit cards for short-term funds. With a personal loan, you’ll get monthly payments that don’t change and a more reasonable interest rate. Seek out a qualified lender, and make plans to save a little at a time for next year.
Learning to manage a budget becomes a fairly simple task with a bit of practice. Take a look at The Basics of Budgeting to get started.
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