Nearly a decade ago, after reading an inspiring article from Chief Family Officer, we began accounting for sporadic bills by starting an Infrequent Bills Account Tracking these bills and setting aside money for them on a monthly basis allowed us to assess our financial health more accurately.
This change to our financial accounting process has been one of the most beneficial of the last 10 years.
The Infrequent Bills Account Process
At that time, I took all of our non-monthly bills (car insurance, life insurance, newspaper subscription, etc…) and figured out their monthly payment. Then, I totaled up the amount we would need to set aside each month for those bills.
Finally, I set up an automatic transfer from our checking account into our high-yield online savings account. We had been budgeting this amount on paper for years, but now the money was physically moved. I also added a formula to subtract that infrequent bills amount from our weekly worth calculation.
After this process, we had a more realistic number for our worth calculation and a better idea of how well we were sticking to our budget each month. When a bill came due, we paid it out of checking, then transferred the same amount from the online infrequent bills account into the checking account.
The Benefits of this Type of Accounting
- A more accurate financial picture – Prior to instating an infrequent bills account, our month-to-month finances varied depending on the day of the month and which bills had been paid. Now our financial picture is more constant.
- Better preparation for upcoming bills – Similar to using an escrow account, we had already set aside money for bills. When they came due, there were no surprises.
- Greater understanding of the sporadic bills – When you take a payment that occurs once every six months (car insurance, for example) and then divide that payment out into monthly premiums, it’s easier to compare items across all budgeting categories and determine if a sporadic bill is eating up too much cash flow.
Our Infrequent Bills System Now
Since that time we’ve continued to track our sporadic bills. Due to a low yield in our “high-yield” online savings, we closed the account. The money for these infrequent bills is now combined with the general funds in our local savings account and is tracked via spreadsheet.
Monthly accounting for sporadic bills has been a huge help. Do you have any tips on how to track infrequent spending?
This article was shared at Thrifty Thursdays.