Everyone has bills, whether it’s their monthly utility bills they need to cover or cable. But when you have large bills to pay such as property taxes or homeowner’s insurance, this can take a huge chunk out of savings if you do not budget accordingly throughout the year. What is the best way to budget for expensive or unexpected bills that come along each year?
Work Out when Bills Are Due and Estimate the Total
Start off by going through past bills to work out when they are due and roughly how much the bills cost. Then add the total to get a rough estimate of what you should aim to save. This will give you a figure to start with.
Remember that bills do not stay the same. They can go up or down. Property taxes and homeowner’s insurance will not always stay the same. Homeowner’s insurance cost can fluctuate considerably depending on any major renovations or add-ons you’ve been working on, or discounts you are entitled to for having a home security system in place, as well as other factors.
Find Out If Expensive Bills Can Be Paid in Installments
Receiving a bill for $5,000 can come as quite a shock, but before you dig into savings or take out a loan to cover the bill, find out if you can pay in installments. Many companies will allow you to pay in equal installments until the bill has been settled.
But make sure you find out if you will be charged interest or a “service fee” for choosing this payment option before you agree to this option.
Avoid Late Penalty Charges
If you are trying to budget for expensive or unexpected bills that come along each year, the last thing you will want to do is pay the bills late, as you will incur a late penalty charge and a black mark against your name. Always strive to settle bills, including expensive bills, in a timely manner.
Start Saving for Expensive Bills a Year in Advance
Saving for expensive bills can help you to cover the costs without having to miss a payment or go into debt when bills are due and you cannot afford to pay them. After working out a rough estimate of how much you need to save, divide the amount by twelve and then start to save.
Put the money into an account that will only be used for bills. Do not use the account as an emergency fund or for incidentals; otherwise, the amount will soon dwindle and you will find yourself back to square one.
Expensive bills can be stressful to deal with, but they must be dealt with. Start off by doing some homework on your bills by finding out when bills are due and a rough estimate of what they were last year. Can these bills be paid in installments? If so, will there be a service fee? The last thing you will want to do is skip a payment, as you will face a penalty charge. Once you have an idea of how much you need to cover the cost of expensive bills, start saving a year in advance.