Budgeting for annual or one time expenses
I've been using YNAB for a few months now and it has really improved my ability to manage my money. However, I'm having a hard time figuring out how to use the software to account for one time expenses or annual expenses that don't necessarily need to go into my monthly budget. For example: I saved up for a certification exam I had to take for work, paid for it out of the budgeted amount, but now I no longer need the category. When I attempt to delete the category I have to categorize the transaction and it messes with my entire budget. How does everyone handle these kind of expenses? I hate to have an entry to every single annual expense or one time expense that I run into
If you don't need a category anymore, you should hide it. Only delete a category if you never assigned it to a transaction.
For the annuals, it kind of depends on what it is. If you have a bunch of annual subscriptions, you could just have one category for subscriptions and make sure you are budgeting enough each month to the category so that when they come due, the money will be there. Just takes a little up-front math to figure out how much that monthly allocation should be.
Annual Expenses are easier to deal with if you save up 1/12 of them each month. You could group them under an "Annual Expense" master category at the bottom of your budget if you don't want to scroll past them.
One-off expenses that don't have any connections to existing categories could be put in a category used only for those types of things, & funded only when needed. I've found I can usually assign a category (parking gets assigned based on what I was doing when I had to pay for parking), or it's something that could happen again (Random Bank Fees, for example) and should have a category.
For one off categories, either hide them or repurpose them.
For recurring non-monthly expenses, you should be budgeting the same amount each month so that when it is due you have the full amount saved up. Then you spend it and repeat the process. This will normalize your budget. and make it easy to see if you are living below your means.
I’m a new user, have read this topic about handling one time expense, but I’m still unclear. I get the idea of budgeting 1/12 of an annual expense. But there are expenses that don’t occur predictably. Auto repairs for example. I can budget 1/12 of a guess of what annual repairs may be, but half the budget amount could be needed next month when I haven’t accrued enough. How do you handle a situation like that which I think of as budget busters?
Hi @Slate Blue Captain,
I would guess everyone here has a different answer to your questions. I will start with how I deal with them, then recommend you take the appropriate classes, they really help.
I have two separate category groups for the expenses you list.
I have one for annual expenses, which splits my known, upcoming costs, into 12 equal payments which I add to each month, resulting in having enough when the bill is due next. I call this my "annual expenses" category group and list each one I have. The categories gets kind of bulky but collapse it most of the time and only look at it when one of the items comes due, then reset for the following year. Every month this category group is automatically funded with $xx.
For things like auto repairs, I figured out how much I have available to save, then how much I figure I might spend in a given year, then divide by 12 and budget that much monthly. Over time, I hope to have enough in the individual categories when I have to do some spending here. I call this category group my "true expenses" and break it down for most of my known upcoming expenses, things like vehicle repair, medical/personal, vet visits, home maintenance, gifts, that sort of things. I know they are coming, I just don't know when or how much. Every month I put $xx in here also.
So far, this has worked for me. Hope you find something that works out for you also.
Some expenses really are 1-off..,. or they better be.
Like my rolling red-light ticket (This was actually a safety maneuver, but gov't doesn't care about my intent). Hello $600 expense!
I setup my YNAB after watching a number of Youtube videos on the topic. One popular vlogger there suggested a category of "Things I didn't budget for"... first couple months I didn't see a need for this so I removed it.
But this generic 'bucket' is where I put my ticket, it's better than throwing off my other categories and I'm not going to stuff money into a Ticket category every month that I won't need.