Stewardship Tips: Planning for Annual Expenses
Annual expenses can be difficult to plan for. Most of us are on fairly tight budgets to begin with, with not a lot of headroom to set aside additional money for events or expenses that occur only once a year. As a result, we tend not to budget money on a monthly basis for these expenses, and then scramble to meet them when they occur. This can result in increased credit card debt and add stress to our finances.
Here are a few suggestions to help in handling annual expenses; pass these on to your congregation!
- Understand what your annual expenses are. Christmas, vacations, occasions like anniversaries and birthdays that call for additional spending – these are examples of events and items that create annual expenses. Consider also annual bills such as taxes (income and property), insurance (home/auto, etc.), and others. Estimate these as closely as you can – both amounts and dates.
- Consider matching up annual income with these expenses. For example, tax refunds and annual bonuses make good income for purposes like this. While it’s difficult to count on those from a budgeting standpoint, any windfall incomes like this can help with preparing for annual expenses. Often, if we don’t make specific plans for these windfall incomes, we end up spending them on things we don’t really need and may deprive ourselves of an opportunity to handle the larger annual expenses without going into debt.
- Consider making monthly expenses of annual bills, where possible. For example, property taxes and homeowners insurance can often be rolled into monthly house payments and held in escrow for the annual payments. This is a kind of “forced savings” for these annual expenses and can prevent surprises that create financial strain.
- Consider setting up a separate bank account for annual expenses and target an amount you need to deposit each month to that account in order to meet your expenses. By keeping this money separate from your normal spending money, you can prevent using the money for other purposes, again ensuring that you have it available when you need it.
- Evaluate the importance of your annual expenses. Some expenses are relatively fixed, such as property taxes. But for those that can be controlled to an extent, determine how much you can really afford. Do you need to spend as much as you were originally considering for Christmas or other events? Is a less expensive vacation an option? Often, a little creativity can replace significant spending in some of these areas and can result in more meaningful experiences and lasting memories.
However you decide to approach it, be sure to consider annual expenses as part of the budget process. And track with your saving and available funds to meet those expenses. A little planning and discipline can prevent a significant amount of debt-related stress!