Documentation
Non-Recurring Expenses
When creating a budget, it is very important to account for non-recurring expenses. In terms of a monthly budget, non-recurring expenses are those expenses that do not recur every month.
Some examples of non-recurring expenses are:
- Annual membership dues.
- Annual insurance premiums.
- Property taxes.
These non-recurring expenses are paid annually, semiannually, quarterly, or on some other basis other than month-to-month. Since the most common and the easiest way to budget is on a monthly basis, and this is how Track My Dough is designed, all expenses that do not recur every month should be considered non-recurring.
In order to account for these non-recurring expenses and incorporate them into our budget, we need to calculate their monthly equivalent.
Let's consider an example of an insurance premium that is paid annually and costs $120 per year. To calculate its monthly equivalent, we need to take $120 and divide it by 12 months, which would equal to $10 per month (120 / 12 = 10).
This $10 will become a part of our monthly budget. Every month we will take $10 and set it aside in its own category. When this insurance bill comes due in a year, we will already have $120 set aside to pay for it.
Keep in mind that some non-recurring expenses are a little bit harder to calculate. For example, a car or home maintenance would be considered a non-recurring expense. However, calculating such an expanse is not simple, at least not initially. As long as we keep track of all expenses, overtime it will become clearer how much should be set aside each month.
We can also do a little bit of research to help us calculate these amounts. For example, we can lookup how much we can expect to spend annually on maintenance for our particular type of car. From there we can determine how much should be set aside each month.
Recognizing and including non-recurring expenses in our monthly budget helps smooth out the impact of these expenses, especially those that arise unexpectedly.
When creating a budget, it is very important to account for non-recurring expenses. In terms of a monthly budget, non-recurring expenses are those expenses that do not recur every month.
Some examples of non-recurring expenses are:
- Annual membership dues.
- Annual insurance premiums.
- Property taxes.
These non-recurring expenses are paid annually, semiannually, quarterly, or on some other basis other than month-to-month. Since the most common and the easiest way to budget is on a monthly basis, and this is how Track My Dough is designed, all expenses that do not recur every month should be considered non-recurring.
In order to account for these non-recurring expenses and incorporate them into our budget, we need to calculate their monthly equivalent.
Let's consider an example of an insurance premium that is paid annually and costs $120 per year. To calculate its monthly equivalent, we need to take $120 and divide it by 12 months, which would equal to $10 per month (120 / 12 = 10).
This $10 will become a part of our monthly budget. Every month we will take $10 and set it aside in its own category. When this insurance bill comes due in a year, we will already have $120 set aside to pay for it.
Keep in mind that some non-recurring expenses are a little bit harder to calculate. For example, a car or home maintenance would be considered a non-recurring expense. However, calculating such an expanse is not simple, at least not initially. As long as we keep track of all expenses, overtime it will become clearer how much should be set aside each month.
We can also do a little bit of research to help us calculate these amounts. For example, we can lookup how much we can expect to spend annually on maintenance for our particular type of car. From there we can determine how much should be set aside each month.
Recognizing and including non-recurring expenses in our monthly budget helps smooth out the impact of these expenses, especially those that arise unexpectedly.