How I Evened-out my Irregular Expenses

Depending on when you start using YNAB you might find yourself initially confronted with fast arriving due dates for irregular expenses you haven't had time to buffer for.  

That's what happened to me when I started in March of this year.  Almost immediately I was confronted with $1,200 of irregular expenses coming due within a month!

One of the major reasons I adopted YNAB was to reconcile my irregular expenses with my highly variable freelance income.  I had to even-out those irregular cash flows as soon as I could.  This is how I approached the problem for my HOA dues .  

My HOA dues come due quarterly in April, July, October and December and the amount due is $600 per payment.

I set up each due date as a separate sub-category under HOA and funded each as follows:

HOA

April pmt:     $600/2  =  $300/month

July pmt:       $600/5  = $120/month

Oct pmt:       $600/8 = $75/month

Dec pmt:       $600/10 = $60/month

When the April payment came due I paid it off and the following month (May) I started budgeting for April's payment for NEXT year (2019), funding it as $600/12 = $50/month. I will do the same when each of the other payments comes due.

I did this for all my irregular expenses categories.

 It will cost me several thousand dollars out of my emergency fund and take the rest of 2018 to accomplish but I believe the goal is a worthy one and decided to bite the bullet now.  

Starting in 2019 I'll be able to collapse the HOA account into a single sub-category of True Expenses funded at ($600 X 4 pmts) / 12 = $200/month.  

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  • I'm curious why you did it that way. You should be able to budget $200/month for HOA, once you get past the first quarterly payment, which you have now done.  You seem to be saving too much up front for this quarterly expense, while needlessly depleting your emergency fund in favor of having too much in your category.

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      • Beige Banjo
      • Sailor of topographic oceans
      • Beige_Banjo.1
      • 2 yrs ago
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      nolesrule   After the 2nd (July) payment actually ($120 + $75 + $60 = $255).  Why did I decide to do things this way?  Well it has to do with the fact that my irregular expenses are all over the place with HOA, municipal taxes, school taxes, income taxes and other stuff on different quarterly payment schedules.  It's messy to track what, when and how much is due otherwise.  That'll all change when the retooling of my True Expenses is finished and the "lumpiness" is evened out.  The decision to raid my EFund for the money needed to accomplish the retooling was a conscious decision on my part in the best traditions of ynabbery.  How did you do it?  Perhaps you can give me some ideas of other ways I could accomplish this?  

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      • Beige Banjo
      • Sailor of topographic oceans
      • Beige_Banjo.1
      • 2 yrs ago
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      BTW I have very irregular income and my clients reimburse on net 60 and even net 90 terms which forces me to budget money out to future months before I get paid so as not to get caught "flat footed"  Before YNAB I didn't include True Expenses in this planning and got caught-out plenty.  The awareness YNAB provides of True Expenses has been a saving grace!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
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      Beige Banjo But my point was that if the irregular payments are recurring regularly and for the same amount at each occurrence, you are reserving more money than necessary once you get past the first payment. The formula is simply amount due / N, where N is the number of months you have to save. For the HOA, it's just $600 every 3 months, or $200/month once you get onto the regular schedule. You only need to save for one quarterly payment at a time, because it is a recurring quarterly payment.

      But the way you have it set up, you are treating it like 4 different annual payments spaced 3 months apart, and it will take you 3 cycles (9 months) before you get down to only $200/month for HOA. Under this plan, you're actually sitting on hundreds of dollars more than you need in your HOA category which could be better deployed elsewhere.

      Considering your income situation, you are better off not budgeting more than you actually need for any particular true expense category and building up a deferred income category using excess funds from good income months to cover shortfalls in low income months so you can have an even budget.

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      • Beige Banjo
      • Sailor of topographic oceans
      • Beige_Banjo.1
      • 2 yrs ago
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      nolesrule  Point well taken regarding sitting on a pile of money in my HOA category.  I might be a little OCD in that regard.  I'll run a scenario similar to the one you suggest and see if that works for me. If it does then I might just go ahead and do that. 

      I don't believe a "deferred income" category is for me, however.  My personal preference is to budget-out future months.   I am debt-free with a paid-off mortgage so for me financial security means being fully buffered with six month's expenses as a target balance in my E-fund and I should get there by next year.  For me being "fully buffered" means being budgeted out until I next expect to be paid (about 2 months on average)+ one month "just in case".  That gives me the inner peace I value so much.

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      • Beige Banjo
      • Sailor of topographic oceans
      • Beige_Banjo.1
      • 2 yrs ago
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      • Reported - view

      nolesrule   I did as you suggested and it worked just fine.  Your input allowed me to redeploy a considerable hunk of change.  Thank you!

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