How to Save Money » Budgeting

Random Expenses You Should Budget For

Random Expenses to Budget For.

Random Expenses

Do you have a yearly expenses account for budgeting purposes? Or do you find yourself running into “unexpected” expenses all the time, with no way to pay for them?

It’s possible to stop those random expenses from creeping up on you – all in the form of something I like to call a yearly expenses savings account.

What is a savings account?

A yearly expenses savings account is an easy way to put money away for those expenses that don’t happen every month, but rather, every other month, every few months, or every year.

You must come up with a list of expenses that happen over the course of 1 year, add up their costs, and set aside that money to use throughout the year as those expenses present themselves.

Instead of just having a pile of money set aside for these random expenses, you need to know what all of that money is for. You need to have a cost determined for each individual expenses in that yearly expenses account.

What are your yearly expenses?

Sit down and go over every single expenses that might come up in a year. Think about those irregular expenses that you have been faced with recently, and write them all down. Even if you don’t know what month those expenses will occur, or what the exact cost will be, at least write them down.

Some things you may consider including are

  • Birthday gifts
  • Christmas gifts, food, decor and entertainment
  • Hair cuts
  • Oil changes for your vehicle
  • Pet vaccines, special medications, special pet food
  • Prescriptions
  • Automobile and Home Insurance
  • Dentist Visits

Of course, your list may include other things and will likely not include all of the examples above. Think very carefully about the expenses you incur each year and add them to this list.

How much to budget for each expense

This step will come with a bit of trial and error. You will have to make an estimate for most things on your list, so to be safe, always go with the higher estimate. That way you will be more likely to stay on budget. If the cost ends up being much less than what you thought, you can lower that amount for next year.

When it comes to things like birthday gifts, you will need to make another list with the people you will likely have to purchase gifts for. Determine a budgeted amount for each person, add those numbers up, and that is your budget for birthday gifts for the year.

Do the same thing for Christmas gifts.

Some things will likely be the same price each year, such as oil changes, insurance and pet vaccines. Double check what those prices will be, and put those numbers on your yearly expenses list.

Setting up your account

I have written about yearly expenses accounts before, and a question I am often asked about them is about where you should keep your savings.

My personal recommendation is ING Direct for a few reasons.

  1. They offer a higher interest amount than most banks do
  2. You usually have to wait 24-48 business hours to get your money (this is a good thing – you don’t want the money to be too accessible, otherwise you might spend it on things other than those in your yearly expenses account)

How to start saving money

Once you have written out your yearly expenses and their costs, you must add all of those costs up to come up with a yearly total.

Divide that yearly total by 12 and that’s how much money you must be setting aside each month. To make things easier on yourself, set up an automatic withdrawal with your bank to have that monthly amount deposited into your yearly expenses account each month.

As you incur each expense, you can take the money from your yearly expenses account and put it back into your chequing account. Alternatively, you can pay for each expense directly from that yearly expenses account. The choice is yours.

It’s important to have this yearly expenses account for budgeting. Running into those random expenses always seems to happen at the worst possible time, doesn’t it? That is why a yearly expenses savings account is so important.

If you don’t want to have a separate account for this spending, that’s fine. As long as you are disciplined enough with your money that you can keep it in your chequing account and not spend it on anything except those random expenses (that you have budgeted for), this money can be saved anywhere you want.

The most important thing is to keep these annual costs in mind when creating your budget. Don’t ignore them and assume you will figure something out when those expenses pop up. Instead, have a plan in place for paying these expenses easily.

Do you have a yearly expenses account? What do you budget for?


  1. teachermum

    It changed my entire peace of mind when we did this. Our extended family of 12 has 10 of its birthdays from Aug 27 to Dec 18 (gifts bought for all). And Christmas. And our car insurance comes due in that time. And we order 1/4 or 1/2 beef in the fall. And our taxes used to be split between the end of June and the end of October (nice division, eh?!). The end of the year was a killer and it seemed just impossible to “save” the right amount of money to cover it in one stinkin’ account!

    I love our credit union because you can have a million accounts. Every pay we have x amount automatically transferred to another account where all of our automatic payments come out of as well as the insurance that still charges to do so (no I will NOT pay them to withdraw monthly!) and known costs-the ones I can put a yearly figure on. So that includes tithe, gas, hydro, water heater, taxes, cable, phone, cell, newspaper, life insurance, car insurance, oil changes, TFFS contribution, meat order, gifts, a regular donation we make. It’s a big chunk that comes out but I never have to worry about paying those fixed bills, the money is always sitting there ready to go. Most are automatically withdrawn, I have cheques on this account for times I need them.

    We also have another account with a smaller amount transferred for clothing, car and home maintenance.

    We have another account for tax returns or bonuses should they show up. That often goes toward our vacations.

    What’s left in the main account is what we have left to spend, mostly groceries and gas. I do need to redo the numbers as the kids are at the point that I can break off bills in their name (cell/car ince) that they have been reimbursing us for–just to make the accounting a bit more straightforward. But I’ll again add up all of those numbers for the year and divide by the number of pays (twice a month) and update the transfer amount. We have more wiggle room now than when I first set it up–it was a lifesaver back then!!!

    We actually use our PC mastercard to buy EVERYTHING so I usually just transfer money around to the account I pay it from online when the time comes (cheaper than the cost of a stamp)-we NEVER carry a balance and I have a ton of points just waiting to be spent now–enough perhaps for a weekend getaway with dh if I plan right! It is also a great way to track what you spend.

    • Sara

      This is very wise thinking. I really enjoy that you went to detailed. Something my husband and I need to sit down and do. Thank you!

  2. Anna

    I just started budgeting and one thing I realized I didn’t count on was “household” stuff – we had to buy a new broom, new gargabe cans, etc. I guess in my head it was going to be taken out of my grocery budget because I shop at Walmart and was figuring a few lightbulbs here and there wouldn’t make a huge difference, but this time it did!

    • teachermum

      Indeed Anna, a few little things can be hidden, but not for long!

      Gail Vaz-Oxlade suggests 3-5% for household maintenance and ideally that should be set aside if you are a homeowner. Several years may pass when you only need a few new lawnchairs, a new garden hose, a new snow shovel etc…but then the roof needs repairing/replacing-eeeeekkkk!!! And the fridge dies the next week-Murphy’s Law!

      The more categories you can plan for, the less surprises–especially those big ones!

  3. Louise

    Another yearly expense is back to school. Between new clothes, shoes, school supplies, new lunchboxes, backpacks, school fees, etc- things can add up quickly. Even if your kids aren’t in school yet the fall always seems to have lots of expenses. We also have a budget for clothes and footwear in the spring.

    • Cassie Howard

      Great tip! Back to school spending can be costly, it’s a good idea to save for it in advance.

  4. Terri Campbell

    Hi Cassie, this is an excellent piece, we have for at least 10 years now used the envelope system, (same as Gail’s jars), most of the larger expense are quarterly, i.e., auto maintenance, home maintenance, furniture & fixtures, doctor/dentist (the portion not covered by benefits), clothing, landscaping (we live in the country and gardening on a large scale can be very costly), & oil (the furnace is only on from November until say April) then we have the monthly envelopes. We have noticed living in the north, the winter months are more expensive for certain things i.e., food costs increase on average 20%, gas. Every january we review the budget and increase/decrease accordingly.

    • Cassie Howard

      Sounds like you are very smart with your money! Good for you. 🙂

  5. Nicole

    I agree with teachermum that I love my credit union because I can set up multiple accounts under one account number. I can go online & see all my accounts there and transfer money between accounts as needed. (My credit union has free accounts where I don’t pay for transactions, but no interest however it doesn’t matter when I have just a little money in an account designed for somthing specific). I find this a great tool for budgeting & can have term deposits (GIC/CD) too under the same account. I can see my mortgage too!

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