How to categorise unexpected payments (of ambiguous category)
I'm curious how other people categorise certain irregular payments. In this particular situation I had to pay an insurance excess payment on a claim. So I'm curious whether people would categorise this as an insurance (home) payment or, because it's unexpected, would you categorise it to "stuff I forgot to budget for"?
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Insurance for me. I would never categorized to Stuff I Forgot; it's strictly a source of funds from which to reallocate.
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From the description, it sounds like insurance paid a claim on something, but because they overpaid, you need to pay them back. I'd use the same category that would be used when paying your out of pocket portion of the expense.
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I have a budget category for my insurance excess. I keep it topped up (my budget is tight). But I would move it into the relevant place before spending it. If it was vehicle insurance I would categorise it vehicle expenses, or if it was house then house maintenance.
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I think I'd probably make a category for unexpected one-offs (not SIFTBF) and then at the end of each year (or month, or quarter), have a look at which regular categories they could fit into, and where you may need to be allocating more funds to.
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Thanks everyone for your responses - some interesting ideas to consider! 😊
@nolesrules, no there was no overpayment involved so there is nothing to pay back to them.
Just to clarify the situation: a recent storm caused some damage to my house, so I am claiming on my house insurance policy. I'm not sure where you're from & if things are done differently wherever that is, but here (in Aus) people generally have an excess on their house insurance (or whatever insurance in fact) where if a claim is made, you have to pay that excess (of whatever amount - different insurers have different excesses applied to their policies) first, and the insurance company pays the balance of the repairs required under the claim (assuming the insurance co accepts the claim, which in my case, they have accepted it). In fact, the repairs have not yet taken place so the insurance co has not yet paid anything.
So I have paid the excess that is applicable to my house insurance policy and the insurance company will pay the rest of the cost of repairs to be done. I was just wondering how people categorise the payment of that excess (given that it is not a regular cost like an insurance premium is, & hopefully it won't be required again any time soon!).
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Indigo Koala Here in the U.S. we call that the deductible. Same concept. In my budget it would come from the Home Repairs category, because it's going toward the cost of repairing the home.
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Indigo Koala I have a category called House Deductible with those funds reserved. Same thing with Auto Deductible. I hope to never use them, but I want them available if I ever need them.
Many people will break up a generic Emergency Fund like this in order to have insight into handling the more likely multiple, near-simultaneous events.
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I’m in Australia too. I have my excess amounts saved and in their own categories of my budget. E.g. Car Excess $2000, House & Contents Excess $600 etc
If I had to use them, they’d come straight from the categories.
I see these as true expenses so gave them their own categories and goal targets when I set them up. -
I think for now I'm probably going to assign the excess (deductible) payment to home repairs, as that's what its for in this case. I'm hoping I won't have too many instances of having to pay the insurance excess (deductible) that would require its own category! 🤞🏼 (I don't have a car, so no insurance excess required for that.) If I do have to pay the excess on future claims I may well change my mind & make a category for it though.
Do those who do have excess categories for various insurances also do one for health insurance (more so for potential hospital stays - esp if you're here in Aus with the PHI system the way it is here)? or do you just have a hospital category under health expenses?
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I think an emergency category is useful. I’d define it as “unexpected and therefore not normally budgeted” and try to build it up to a reasonable balance before an emergency occurs. Something that requires an insurance claim is almost certainly “unexpected and therefore not normally required”. I’d move funds from the emergency envelope to the house repairs envelope to actually pay the bill. Why? Because if it happens more often than very rarely, I ought to budget for it in the house repair category.
