TIP: Treat annual expenses as monthly

stud26

Not sure if this has been discussed before but thought I'd share anyway.

Earlier this year I started to treat my annual expenses as monthly ones. Dividing the expense by 12 and saving that amount each month. Now I know my subscriptions, insurances, car service etc are all covered. Gutted it's taken me this long to start it, but it's an absolute game changer. 

I keep track of it in a spreadsheet and keep the money in high interest savings. The peace of mind it gives me is incredible. 

Would be great to hear if anyone else does this already or has other "hacks" and tips to share.

RAS

Well done. There's a lot of folk need the same light bulb to shine.

Not least as Martin has long explained that Christmas and birthdays come round each year on the same date. So you have 12 months to plan for them.

tacpot12

You can extend this idea to treat irregular expenses such as replacing washing machines, boilers, sofas and mattresses as monthly expenses. 

If your boiler cost £3000 to replace this year, you can guarantee you are going to have a bill of £6000 in 20 years time replace it, so start savings £20 a month now, and in 20 years time you will have most of the money for a new boiler - compound interest will mean that you don't need to save quite as mich as you expect the bill to be.

The more items you save to replace, the more flexibility you will have in your fund. This fund can also serve as a funeral fund as well - if you die, you don't need to buy a new boiler!

stud26

tacpot12 said:

You can extend this idea to treat irregular expenses such as replacing washing machines, boilers, sofas and mattresses as monthly expenses. 

If your boiler cost £3000 to replace this year, you can guarantee you are going to have a bill of £6000 in 20 years time replace it, so start savings £20 a month now, and in 20 years time you will have most of the money for a new boiler - compound interest will mean that you don't need to save quite as mich as you expect the bill to be.

The more items you save to replace, the more flexibility you will have in your fund. This fund can also serve as a funeral fund as well - if you die, you don't need to buy a new boiler!

Great minds...That's exactly what I've done. Double glazing, heat pump, appliances, new roof etc, all catered for. 

They should teach this stuff in schools.

enthusiasticsaver

I have always done this. My annual costs saved for monthly are as follows:

insurances and car breakdown cover
car services and mot and tax
holidays
christmas and birthdays
leisure club sub ( I get two months free if I pay annually)
gas fire and boiler services
garden waste subs

I build in a bit extra each month to cover white good replacement and oven cleaning/carpet cleaning costs.

It saves the stress of finding lots of these costs in one month. Some people have lots of different pots for these but I just have the one which is separate to my medium/long term savings. If I start the year with a good buffer I save in regular savers then transfer over on maturity giving me a years worth of annual costs immediately.. 

stud26

enthusiasticsaver said:

I have always done this. My annual costs saved for monthly are as follows:

insurances and car breakdown cover
car services and mot and tax
holidays
christmas and birthdays
leisure club sub ( I get two months free if I pay annually)
gas fire and boiler services
garden waste subs

I build in a bit extra each month to cover white good replacement and oven cleaning/carpet cleaning costs.

It saves the stress of finding lots of these costs in one month. Some people have lots of different pots for these but I just have the one which is separate to my medium/long term savings. If I start the year with a good buffer I save in regular savers then transfer over on maturity giving me a years worth of annual costs immediately.. 

Glad I'm not the only one doing this. Hopefully others read this and do the same. It's such a stress reliever.

kimwp

Nice! Some people find it easier to have one pot for all their annual expenses, it just depends how your mind works.

Either way, another pot that you feed a little (or a lot) each month is a good idea to act as a buffer (emergency savings) - aim for a week, then a month, then two months etc of expenditure, eventually you'll have a year of buffer so there's no worry about saving up enough.