Not every Expense or bill we encounter comes due on a monthly basis. Expenses that are paid out on a Quarterly, Semi-Annual or Annual basis are called Periodics, because they only come due on a periodic basis. Other expenses like home maintenance, an upcoming vacation or a wedding are also considered periodic and should be treated as any other periodic expense.
When you prepare a monthly budget or cash flow plan, you must include any known future periodics in your plan. Those people who don’t include these expenses in their monthly plan find themselves unable to cover the expense without experiencing a hardship or charging up a credit card.
All periodic expenses need to be treated as if they were a monthly expense. When you develop your plan, you may want to look out several years ahead so you can be assured every possible periodic expense is covered.
As you develop your plan and determine what all your periodics are, you will need to take each periodic separately and divide it’s total cost by the number of months that remain before it comes due. This amount will become your monthly set aside for that upcoming expense.
Once you determine what all your monthly periodic set asides are, you will then add them all up and move the total sum to a separate checking account that will be used strictly for the periodic expenses once they come due.
When you include all your future periodics into your monthly plan, your plan becomes stable and consistent with little to no variation making it easier to manage your monthly income.