By Jennifer Jahn
NKyTribune staff writer
It is time to look at the yearly calendar and jot down annual events such as birthdays, anniversaries, and even routine tasks like checking your home fire extinguisher.
It is also a good time to make sure your bank account is prepared for expenses that occur just once a year. For many people, these costs slip out of sight and out of mind until the surprise bill shows up in the mailbox.
Annual Expenses
Below are some of the most common annual charges. This list can help you compile or review your own budget tracker.
Auto registration fees
Car insurance premiums
Renter’s insurance premiums
Holiday, birthday, anniversary gifts
Vacation
Pet vaccinations
Life insurance premiums
Any subscription and/or membership fees
Tax preparation fees
Homeowner’s insurance and taxes
Summer camp or seasonal activities
How to Prepare
If you have not yet created a yearly budget, now is a great time to start. One effective way to prepare for annual expenses is to take the total amount due, divide it by the number of months you have left to save, and set that amount aside each month until the bill is due.
A helpful way to organize these savings is by creating a “sinking fund,” according to personal finance expert Dave Ramsey. A sinking fund is a separate savings account set aside for a specific purpose or bill. Keeping these funds separate helps ensure they are available when needed and not accidentally spent elsewhere.
Sinking funds are good for everyone whether you’re one who diligently saves or one who finds it challenging to stay on budget. A sinking fund will work for you. While they do require planning, they can greatly reduce financial stress.
Sit down with your spouse or, if alone, someone you trust to be financially sound. Review your list of annual expenses and determine how much to set aside for each. This is also a good opportunity to discuss any larger purchases you may be considering and whether it makes sense to start a sinking fund for them.
By keeping an updated budget tracker, planning for known expenses, and using sinking funds, you can avoid many unnecessary budget “emergencies.”
More importantly, you gain clarity and control over where your money is and where it is going as you take an important step toward a stronger financial future.