How to fit yearly bills into a monthly budget
Short answer
List every cost that does not come monthly, add them up and divide by 12. Move that amount into a separate savings pot each month. When a bill arrives, you pay it from the pot, and your normal monthly budget stays untouched.
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An example
| Cost | Per year | Per month |
|---|---|---|
| Home insurance | €600 | €50 |
| Car tax and service | €240 | €20 |
| Holidays | €1,800 | €150 |
| Total | €2,640 | €220 |
Moving €220 a month covers all three, whenever they fall due.
How to set it up
- Check last year's bank statements for costs that came once or twice.
- Note each amount and the month it is due.
- Divide the total by 12 and set up an automatic transfer after payday.
- Pay those bills from the pot, and update the amounts when prices change.
Costs people often forget
- Insurance, memberships and annual subscriptions
- Local taxes and accountant fees
- Birthdays, Christmas and other gifts
- Car and home repairs
If your first bill is due soon
You may not have time to save the full amount. Save what you can for that bill, and let the monthly amount catch up during the year.
Common questions
Is this the same as a sinking fund?
Yes. A sinking fund is the usual name for money set aside each month for a known future cost.
Should this money be separate from my emergency fund?
Yes. Yearly bills are expected, while an emergency fund is for surprises.
What if I get paid a bonus?
A bonus or extra payslip can fill the pot at once, which lowers what you need to set aside each month.
This guide is general information and suggestions only. It is not financial, tax or investment advice. Your situation may differ, so please make your own decisions and speak to a qualified adviser if you need to.
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