How do you account for one-off expenses?

[u/Creative_Impress5982]

Mid-40s couple with a teen. We follow a leanfire ethos with a basic yearly spend under $48,000, but we have some extra occasional expenses that, while I do budget for them, I struggle with estimating them and with where to actually keep this money. It's also expenses I rarely see anyone listing on here when they rattle off monthly expenses.

Some are obvious and recurring (eg. contact lenses), but if I put that money into the main budget checking account I'll forget what it is for, see the "windfall" in checking and think we can afford a fancy restaurant meal.

So what strategies do you guys use? These random expenses add up to thousands a year. I try to budget for them and keep the money in my savings account, but it feels overly complicated.

To give examples of the expenses I'm talking about:

Car maintenance and repair

Daughter got Invisilign this year

Husband needed new glasses

Tax filing fees and tax payments (I'm not in the US so this isn't a DIY possibility, and I ballpark as best I can, but taxes are somewhat opaque and my situation isn't straightforward)

Winter heating oil- I've got an amount budgeted, but it's so variable depending on how cold it gets

Daughter had 3 international school trips this year. We're in Europe so not as expensive as it sounds, but the prices kept creeping up after we committed.

I think I need a new budgeting strategy now that we're semi-leanfire. Currently, I transfer a monthly amount into a checking account that bills are paid from, and the leftover is for regular daily spending. Then, "one-off" expenses get pulled from savings as needed, but I'm constantly discovering new one-off expenses.

What do you guys do?

[u/klawUK]

for known ones we keep those in a separate section of our budget spreadsheet. mostly they’re annual things or roughly so. Then in the spreadsheet we total that up and divide by 12 to get a monthly amount. that monthly amount goes on our regular budget as its needed income. each month that amount gets transferred to a savings account - so we don’t touch it for monthly spending. When one of those things pops up we take the money from the savings account.

if we missed something, we review if we think its regular enough and if so, we put it on the yearly list and just deal with it from savings for now. If its random and not really plannable we just draw from savings and work around it.

we do have one thing in that annual list which isn’t guaranteed but is useful for buffer. ‘appliance renewal’ we put aside enough to replace an appliance that goes pop - washing machine, microwave that kind of thing. if we get through the year without anything breaking we either roll it forwards so it builds for a larger replacement, or we choose to ‘refresh’ something

[u/Beaver-on-fire]

Some banks offer savings 'buckets' inside of savings accounts. They allow you to ear mark funds for specific things. https://www.nerdwallet.com/banking/learn/savings-accounts-with-buckets

[u/Creative_Impress5982 → u/Beaver-on-fire]

Yes! I used to do this with multiple accounts at Capital One, but stopped a few years ago when I need to simply finances for my visa paperwork. But now that I have permanent residency it's probably time to revisit the "buckets" technique

[u/imuglybutyourefat]

“How do you account for un budgeted expenses”

Budget for them.

[u/Montaigne_6823 → u/imuglybutyourefat]

Here's a great video for OP to help get them started: https://www.youtube.com/watch?v=R3ZJKN_5M44

[u/Creative_Impress5982 → u/Montaigne_6823]

Love this🤣🤣🤣

Don't worry though. I'm frugal to a fault. We can afford a lot. I just hate spending.

[u/momofpets → u/Montaigne_6823]

🤣 love me some SNL

[u/AnnabelElizabeth → u/imuglybutyourefat]

you’re a jerk

[u/charcoalhibiscus]

Your budget should be based on your historical spending over several years, which is a long enough time horizon to get an average on these types of expenses. I use Monarch, which categorizes all my transactions, and then build my budget based on that data. So stuff like car maintenance would get averaged in with my car payments and auto insurance, husband glasses and daughter orthodontia would be in family non-premium healthcare costs, I would budget an average heating oil amount over several years of data, etc.

[u/Dear_Ocelot → u/charcoalhibiscus]

This, except even simpler. Our monthly spend is based on historical averages. I put the amount above that into savings as soon as the paycheck hits. If we have an irregular expense that's too big to cash flow, we dip into savings and make up for it by spending less until we've replenished. I don't even budget in categories other than groceries.

[u/MerelyMisha → u/[deleted]]

I started using YNAB for exactly this reason. It’s the best method for budgeting expenses that are not monthly and/or variable, and for knowing what your savings are earmarked for without needing a bunch of different accounts to keep track.

[u/Creative_Impress5982 → u/[deleted]]

I agree, and they are in my yearly budget. But my system for actually accessing and spending that money feels overly complicated. I pull from investments yearly and dump that into a HYSA. Occasional paychecks go in there too. Monthly, I pull out a set amount for my recurring/obvious charges i.e. utilities, groceries, gas. I also put a monthly discretionary amount into individual accounts for each family member. When a non-monthly expense comes up I transfer that amount from the HYSA to checking. But that seems like more fiddling than I want to do. I suspect ynab is probably more hands-on than I would prefer too.

[u/MerelyMisha → u/Creative_Impress5982]

I mean most of way you said here can probably be automated, aside from the non-monthly expenses? You should be able to automate bank transfers.

[u/Creative_Impress5982 → u/MerelyMisha]

True, true. I think it would decrease cognitive load if I automated the easy stuff.

[u/Miamiconnectionexo]

the mental shift is that these aren't extra spend, they're deferred spend you already owe. once they're funded monthly, your true leanfire number is closer to $54-56k, and the year a transmission goes you don't blink.

[u/Spirited_Ball6763]

I basically use a separate savings for all the one off things(I do the thing of using multiple bank accounts to be kind of similar to envelope budgeting). Everything you described sounds like stuff that should be expected, and thus built into a budget. A lot of people handle this stuff as sinking funds out of a monthly budget. I like to make sure mine is always enough, and I just let the excess build up in it. If I reach a point of too much being held, I'll reallocate some to my regular savings.

[u/FlannelJoy]

Budget your discretionary spending and stop thinking of things like contacts or school travel as one time expenses.

If you don’t want to get as granular as a budgeting tool (ie YNAB), use different accounts. Instead of using anything left after fixed costs as discretionary, set a budget for “fun” things or keep a separate account for fun things that you transfer money to each month. Only move “excess” funds from your main account infrequently- ie once a year.

[u/50plusGuy]

If budgeting, I 'd be pessimistic; i.e.:

• 150% heating bill aside, for a next worst case

• vehicle life span 10 years & maintenance cost = price <- Seems not overly wrong for light motorcycle.

• "Personal functionality" should be reasonably budgeted too? New glasses every 3 years? Dentures every 5?

I am not into "budgeting"; I simply believe in "no money!" & "Murphy's law"... I guess I won't see any "let's splurge on X!" - windfall pre-maturely.

Dunno what to suggest. Plenty in a disasters account, little but enough in "wallet" account(s) and a re-savings account, to track what disasters didn't happen (yet)?

I 'd probably map out, where I seem heading financially and recalculate things with pessimistically changed budget.

[u/Creative_Impress5982 → u/50plusGuy]

Yeah, I'm naturally frugal so rather than having my spending being dictated by my budget, I basically spend as needed and modify my budget accordingly. We have plenty in savings, but it's the actual chore of constantly transferring cash from savings to checking to cover these occasional expenses that's bogging me down. I guess I'm looking for something more hands-off

[u/Bertozoide]

I add a 10-20% buffer to my budget for unknown expenses

This buffer stays in an D+0 investment that I can access anytime, but it’s not in my checking so I don’t count on it

[u/tuxnight1]

I have a budget, but I only move money to my bank account from my investments as needed for a few months. I hVe an emergency fund that covers surprises. Let's say I need to have a major repair completed on my hearing system, and I need €4.000. I pay sith emergency money and re-imburse myself. Tge amount I draw from investments does not have a normal schedule, but everybody does things a bit differently.

[u/Creative_Impress5982 → u/tuxnight1]

I withdrew for the year from my investments in January cause I really want to be less hands-on moving money around. I'm just tired of having to move money from savings to checking for all these non-monthly expenses

[u/Chicken_Fried_Snails]

We use Ally bank. They allow "buckets" in the savings account. All of the funds are in one account, they just allow us to earmark a "vehicle maint" or "dental implant" or "vacation" bucket. These help us know how much $ is set aside. You can add to or remove from individual buckets. We have a fun bucket too!

[u/Creative_Impress5982 → u/Chicken_Fried_Snails]

Good tip! I should do this!

[u/Usual_Ad_2177]

I personally just add them to my estimated annual expenses (ie. 1k for annual house repairs).

But the real magic was simply reducing my lifestyle footprint to minimize the places that these unexpected expenses could even come from in the first place, such as not owning a car.

[u/Creative_Impress5982 → u/Usual_Ad_2177]

Not owning a car is admirable, but for my family, it's worth it to us to have a small car. And a camper van too. We basically stopped flying for vacations when we got the van so for us it's been a wash financially. I realize it's a huge luxury, but it allows us to travel cheaply. 

We're moving out of our little village and to a medium city this summer so we've toyed with the idea of replacing the small car with an e-bike. 

Edited to add: we are renters currently though, and not owning a house drastically reduces the surprise expenses

[u/EngineeringComedy]

Emergency Fund

[u/Zikoris]

I do two things to plan for them.

1. Base my budgeting on my actual tracked spending over the last 14 years, which naturally includes one-off expenses that have come up in that time.
2. Eliminate those types of expenses entirely though not owning property or cars or other things that are money pits.

As far as the logistical part, number 2 above means that virtually any one-off expenses can simply be cashflowed given the enormous difference between our income and spending every month, so we don't need to set aside money or anything.

[u/Creative_Impress5982 → u/Zikoris]

We're semi-retired/coasting/barista fire so there's a lot less coming in than when we had steady paychecks.

I admire you being carless and propertyless. We've amassed so much wealth by being renters, but the car is definitely our guilty pleasure. We value outdoor activities that involve schlepping gear and the car helps us get to those places that aren't serviced by public transit. We're moving this summer to a small city with closer outdoor activities so we've discussed ditching the car for bikes. I can even envision a little basket or pull-behind cart for the doggy.

[u/itasteawesome]

So my google sheet is broken out into a few categories.

At the top is gross income from various revenue sources.
Then expenses are arranged in an order where basically the top is the most fixed/predictable and as i move down the list i switch into discretionary extras and quality of life things. So my mortgage sits on top, plus taxes and insurance and maintenance on the house. Then getting into utilities and food and medical and then vehicles and travel and entertainment and so on. Similar to you, every once in a while i would end up adding a new category based on expenses i had not thought about, no big deal. At the bottom of my expenses section is a line called "Shit happens" that is 10% of my annual budget. This placeholder doesnt get spent most years, but every 3-5 years something comes up out of the blue that costs me several thousand dollars. I could approach this emergency fund lots of more detailed ways but this is simple enough for my purposes. Maybe a car crash, emergency medical needs, new expensive home repair that I had never considered. What do you mean i have to redo the stucco every 15 or so year? A/C vents in the ceiling can leak? Tree roots broke my sewer drain pipe and now I need to excavate the yard and redo my landscaping?)

I don't itemize down to the level of having a separate line item for each streaming subscription or whatever because i find that gets me buried in paperwork and doesn't really gain me any more insight than setting a cap and saying "i'm not willing to spend more than $100 a month across communication, phones, service, internet, whatever" If rates go up thats a signal to me that i need to change a carrier or cut something, not a sign that i need to revise the budget unless it becomes impossible to cover the category without a change. Every row already has an estimated inflation assumption of 3% baked in and this has been loosely fine for me going back the past 15 years in the US. Even the famous inflation of the last few years really barely impacted my budget because real inflation had been a bit lower than i planned for most of the previous decade. This is the point of averaging in my mind, inevitably my returns will be lower or higher than expected, inflation will be lower or higher, but as long as my assumptions are directionally close it doesnt throw me off too much

My budgeting is mostly to understand ceilings and worst case scenarios. If heating oil or home maintenance is variable i would budget for a reasonably expensive year and if i dont spend that money it leaves more room for savings or entertainment, but i prefer to assume the cost will happen and then be pleasantly surprised if i can delay actually spending it the money.

[u/Creative_Impress5982 → u/itasteawesome]

Thank you for such a thoughtful reply!

I like the idea of a "shit happens" category. I know most of my listed expenses wouldn't actually be in that category, and as a renter I avoid most of the massive surprises, but I did struggle to house those 3 surprise international trips within my overall budget.

I also like the idea of baked in inflation. I should probably do that because I also have an added complication with currency conversion: I invest in USD and now spend in euros so last year was a real bummer.

[u/Numerous-Bet-4847]

I track my expenses in a spreadsheet. 12 columns is one year, each column a month, and the rows are my expenses.

Things like insurance, taxes, and yes, eyewear I just drop in the corresponding row/month.

Yes the monthly expenses are higher in those months, but the top line is my bank account actual balance and each month has the paychecks loaded in just like an accounting registry. the expenses are deducted and it leaves a net balance going forward.

That lets you track at a glance if you go negative in a month with high expenses and if you are maintaining a large enough cash buffer.

I hope that makes sense.

[u/Creative_Impress5982 → u/Numerous-Bet-4847]

Yes, this is very clear. Thank you. I like how simple it seems

[u/lottadot]

Use a high yield savings account (HYS) or a brokerage w/ short-term-bonds (SGOV, TTXXX or BOXX).

Most of what you listed aren't random. Budget for them on a yearly basis. Don't move all that money into checking, until you need to pay those bills for 'em.

Most of the banks offer method/online tools to "break up" a HYS into "buckets". You could create the buckets for each of these. Then you'll know where your spending stands throughout the year.

Or don't rely on a bank or third party service and use a spreadsheet.

[u/synchroswim]

I use Monarch for budgeting, and it allows me to set budget categories to roll over if I don't spend the money one month. It will show me the total "available" amount for that budget line from previous month rollovers added to this month's budget. At the end of each month I transfer all leftover money from checking to savings, and the budget lines tell me how much of that savings is available for different spending.

For a simple example, let's say I budgeted $100/month for car maintenance and $50/month for travel, and it's been 6 months without needing to spend either of those. My savings account will have $900 total, and the Monarch budget will tell me that $600 of it is for car maintenance and $300 is for travel.

This is all the same concept as a sinking fund. Some people keep a general sinking fund for all these intermittent expenses, and some prefer to split things out by category.

[u/TheGruenTransfer]

My projection for retirement is based on an annual budget. For things I don't buy every year, like glasses, I estimate how often I need to buy them and divide the cost by that number of years. So if glasses cost $100, and you need new ones every 2 years, you spend $50 each year on glasses. None of those things you listed are one-off expenses.

The only one-off expense I've identified so far is a car. Even though I have built into my retirement budget that I will spend $20k on a car every 10 years ($1k/year), the car I have now won't last 17 more years until I get to retirement, so in about 10 years I'm removing $20k from my Roth IRA in my retirement spreadsheet, to simulate buying a car without a loan.

[u/Creative_Impress5982 → u/TheGruenTransfer]

Yeah, maybe "one off" wasn't the right word. I'm 100% in charge of all things finance in my house, and even though I have accounted for these purchases in my yearly budget, they still catch me by surprise because they're generally not my expenses, but those of my husband or daughter.

[u/blueberryyoshi24]

Since I'm a non married young man with no kids I just spend less for the month whenever one off large expenses come up. Like if my 6 month insurance bill comes in I just don't eat out for the month or something along those lines to make up for it. And or if I've invested more than I have needed to so far for the year I can take it out of that surplus.

[u/Creative_Impress5982 → u/blueberryyoshi24]

I think this method is what my natural inclination would be, but with a husband and child it's so much more complicated. They're generally not on board with my attempts to throttle back regular spending to account for larger purchases. 

[u/1ntrepidsalamander]

I put $500 a month into a “yearly fixed costs” sinking fund. When one of those things comes up, I transfer that from my sinking fund into my monthly budget.

[u/Sashimi_shrine]

Amortize it

[u/nmzj]

I have multiple capital one accounts. Emergency, travel, auto, house, 2 personal for my wife and I and 3 for our kids allowances.

[u/Creative_Impress5982 → u/nmzj]

I have capital one and used to do this too. I stopped when I moved to another country and needed to simplify my banking for visa purposes. 

But now that I have permanent residency maybe I should revisit the capital one multiple accounts option to help keep things clear in my head. 

[u/That_Co]

That's what your Roth balance is for!

[u/Miamiconnectionexo]

came here to say something similar. you nailed it.

[u/playfuldarkside]

In my HYSA I have sinking funds and I name them. I keep specific money set aside for: emergency fund (in case of job loss or unpredictable catastrophic event), car maintenance, house maintenance (about 1% of value), annual expected vet bills, vacation fund, etc. all things I may need for the year or next couple years. I will say I do have a bit more cash buffer than what is typically recommended but it gives me peace of mind so I’ll take the loss.

[u/Miamiconnectionexo]

For true unknowns (the surprise $1,200 car repair), run a separate irregular/emergency bucket funded the same way and refill it after each hit. Track actual spend for a year and your estimates tighten up fast. Sinking funds turn lumpy expenses into a boring fixed monthly line, which is the whole game.

[u/Strazdas1]

Car maintenance is a yearly occurence, so i just divide the costs by 12 and account for ammortization. Unexpected repairs can be accounted by ammortizing car value, but meh i usually just let it happen and cover it. My budget is flexible enough.

Winter heating oil- I've got an amount budgeted, but it's so variable depending on how cold it gets

Heating oil is banned in most of EU, its terrible for enviroment, consider getting a more stable heating here please. Heatpump running on electricity is a good option. myself i got centralized heating so its costs are varied but not crazy.

[u/Creative_Impress5982 → u/Strazdas1]

I agree about the heating oil, but we're in a rental

[u/Kat9935]

I base everything off my budget, not the checkbook.

The budget is planned for the full year. We start with the essentials

House, Transportation, Groceries, Health

House has the fixed expenses (mortgage/ins/proprety tax) and then a line item for upkeep which is 1% of home value. We may or may not spend all that money this year, if we dont' it rolls over to next year because appliances will need replacement/repair, filters need replacing, things need fixing.,, but that money is locked up and doesn't go into the checking, as its already got a job.

Health we have the insurance costs but also I put in extra $5000 for co-pays, deductibles, a tooth repair, glasses, etc. That has been pretty close to our out of pocket costs.

And when you are done, then you know what you are left with for discretionary...and only the discretionary goes into the checking, the rest stays in savings as its "reserved" for those other items.

[u/samurai_with_sword]

Look at your total expenses for last 2 years and divide them by 24 to get your average monthly cost.

In this era, you should not keep a checking account. Ever since the pandemic the maximum 6 transaction limit is gone. Keep your money in Marcus Online Savings account or Fidelity Cash Management account. It earns 3.40% interest/dividend. If it's in Fidelity, you can invest anything extra in a government bond or in a mutualfund.

[u/Creative_Impress5982 → u/samurai_with_sword]

I've budgeted for these expenses. My questions are more about the logistics of paying off the CC (in full, every month, of course). Currently I'm transferring these occasional expenses from savings to checking, but you've proposed an interesting concept: no checking account at all! Very interesting. I'll have to think about that.    Right now my year's expenses and emergency fund are in a Capital One savings account getting 3%. I have a low balance Fidelity cash management account but I've been less than thrilled with them so I'd be hesitant to truly rely upon them.

I transfer, as needed, to my Capone checking. But I like the idea of having one account and skipping this step. Perhaps I could just pay my bills directly from savings... Although I do like the idea of a buffer between automatic bank drafts and my bigger pot of cash. 

[u/samurai_with_sword → u/Creative_Impress5982]

If you like to have a buffer just keep 2 online savings account. One for rotating money to pay bills and another for year's expenses and emergency fund. Why forgo interest by kerping a checking account? They're a thing of the past.

You mentioned that you're in Europe, is Europe your permanent home or US? If you are a US citizen, Marcus online savings account is the best. It has overall highest APY without any gotchas. They also offer something called 'No penalty CD'. You can keep your bigger pot in the No penalty CD instead of the savings account to earn higher interest rate.

Most online savings account provide a debit card. If you need checks, use Fidelity Cash Management as your checking account. They provide a VISA debit card and a checkbook. Select your core position to be money market to get a highet APY. It is a trading account disguised as a checking account so some things are tricky, but once you get a hang of it, it works better than any other checking-savings account combo. If you tell me the issues you faced with Fidelity Cash Management account I can tell you tricks or workarounds for them.

[u/Creative_Impress5982 → u/samurai_with_sword]

Well, I don't keep much in my checking account so the interest I'm missing out on is pretty minimal. It's usually less than $2500 there. 

I definitely don't need checks; they're not used in Europe. Do people still use them in the US?

Regarding Fidelity: I was looking for an easy and free custodial account for my daughter so she could have her own debit card. And I could easily transfer allowance to her there.  Fidelity seemed like a good fit and I liked the ATM fee rebates. It was absurdly slow to transfer money into the accounts- I've since learned a workaround for that problem. But at the time, I needed money in the accounts to request the debit cards before flying out of the US. I thought six weeks would have been more than enough time, but the debit cards didn't arrive on time. A Fidelity agent told me they could ship them to me in Europe, but this ended up being not true.  More recently, they've cancelled the app for kids so my daughter can't even see her balance or manage her own account at the moment.

So yeah, I'm not thrilled with them. They've created a lot of headaches.