Irregular Payments. I use this term for those bills that don’t occur with any definite period OR happen once in a year. Think Car insurance (and house taxes, annual maintenance etc). you get the idea.

Our initial family budgets used to have expense items for the month and we did those at the start of the month. We got wiser and then started having a standard set of items and approximate amounts for each month. We could then compare every month how we were doing against the “standard.” After a few iterations, we realized that our balances did not match what we spent (against the budget!).

The culprits were these irregular payments. What was causing even more pain was that to pay for each of these special items, we were scrambling at the last minute to make the payment (which was usually large). A few brainstorming sessions later, we came upon a few tricks to avoid such situations.

1. Create a timeline

We made a list of all the possible payments for the year. These included

  • Insurance payments
  • House and maintenance taxes
  • Car insurance
  • Term fees at school for the kids

Then we put up the dates on which these payments were due. We observed that, by pure luck, there were not more than one payment on any month.


Image by Chris Campbell

2. Reschedule Payments

If, by any chance, more than 2 such payments fall in the same month, you might want to consider moving them to another month. This may not always be possible, but there may be some payments which can be moved. For example, you can switch your annual premiums to a monthly schedule for a couple of months and then switch back to an annual schedule.

The key is to schedule them such that those months don’t bunch up together. There will be a bit of inconvenience when you set this up, but it may be good in the long run.

3. Schedule micro-payments

Once you have the calendar schedule of payments ready, you can move on to the really important step. Schedule micro-payments every month for such irregular payments. Some banks in the US, such as ING Direct, allow you to create sub-accounts within your main account. If, like me, you live in a country where these are not available yet, you can put these micro-payments in a single account and track them in a simple Excel spreadsheet. It is important (and obvious) that this “special” account must be different from the account that you normally use.

These micro-payments go into your budget like any other item, so that you don’t end up messing up your budget in those months. This is especially true for those people who don’t have a set income every month (like businessmen, independent consultants etc).

Bonus tip: Start these micro-payments in such a way that you have a sizeable amount for each payment. Also, for one or two payments, this may not be possible in the first year, but for the subsequent years.

Share your tricks and tips for managing home budgets in the comments.