Today we look at number two of the six types of expenses we all need to deal with in life. If you neglect any one of the six you will come to regret it at some point in the future so make sure you read all six installments when they arrive and take appropriate action on each one.
If you missed number one it was Weekly Expenses – (Food, Fuel, Fun and Incidental expenses). You can read all about this one at https://simplybudgets.com.au/the-six-reasons-we-spend-money-part-1/
Now for number two:-2. Non-Weekly Repeating Predictable Expenses – (Otherwise known as ‘Bills’!)
These fall into two groups:-
- Rent, Electricity, Telephone, Rates, Insurance, Planned Gifts, Regular Donations, Vehicle Registration, Memberships, Children’s Lessons, Dentist and other similar expenses.
- Mortgage(s) and/or Loan Repayments
If you are a regular Simply Budgets user you will recognise this as your Regular Expenses List.
These are payments or expenses you can reasonably predict into the future:-
- You know how much they usually cost with reasonable accuracy or you can nominate an amount that will work for you more often than not.
- You know how often they fall due within a yearly cycle
- You know when they will occur next.
If you do not know these three facts about an expense it does not belong in this list.
Where to keep this money
I recommend you open or identify a Bills Account to store this money in and if you have a mortgage you should consider having it offset against the balance of your mortgage to save interest.
How to manage this money
You pay your planned bills from your Bills Account and ideally distribute funds from there to other accounts according to your plan. E.g. your Weekly Expenses money is transferred out to your Day2Day account each week.
Your goal is to:-
- Pay all of these planned expenses on time.
- Always have funds available when these expenses fall due (does wonders for the stress levels!)
- Use as little of your income as possible in paying these expenses (you have better things to do with your income than pay bills!)
- Never have more savings put aside for these expenses than is necessary
The biggest reason people have difficulty with these expenses is because they have no plan and no targets to aim for.
To help you create your plan:-
- Calculate the total cost of these expenses for the year ahead.
- Divide that total by the number of weeks (or pays) in the next year.
You will then know what the ‘per week or per pay’ cost of these expenses is.
That is a really good start but to totally take control of these expanses and reduce money stress dramatically you then need to lay them out on a time line and calculate your day by day target bank balances for the next year in advance.
If you have a copy of the Simply Budgets software it is the easiest way to do this. I originally used a calendar and a calculator to do the calculations. If you’re really keen you could do it that way but the software is not at all expensive and it makes it sooo much easier!
However you go about it you need to look into the future to generate your daily targets to aim for that will make managing this group of expenses really easy and stress free!
Not knowing how much needs to be in your bills account on any given day of the year makes it very difficult to actually have the correct amount available. It is very easy to get caught out by bills arriving when you don’t have this plan in place.