How a Periodic Expense Account Can Save Your Budget

We’ve all had those days – a car tire blows out, the hot water heater stops working, the dentist says your child needs braces, the insurance bill shows up in the mail…All of these things can blow up your finances and cause major headaches. That is, unless you have planned for them. “But how can I plan for all these things if I don’t know that they will happen or when?” you ask. Let me share with you how having a periodic expense account can keep you on the road to financial freedom.

At iMoneyCoach we teach all of our clients about the importance of having a periodic expense account. It is a savings account that you use to keep enough funds for a “financial emergency” that is likely to come up, like car or home repairs, or bills that come once or twice a year like insurance or even newspaper dues. When you create a line item in your budget to make sure you are putting aside a certain amount each month into that account, then when something does come up you don’t have to sweat it.

A good financial coach will always share with you the value of a periodic savings account. Whether you are trying to get out of debt or have gotten rid of your debt, you don’t want a big expense to plunge you further in and make it harder to live in financial freedom. If you are already working hard to get out of a hole, those kinds of expenses can feel like a pile of dirt being thrown right back on you if you are not prepared. Or if you’ve made it out of that pit, one of these “emergencies” could throw you right back in unless you are ready for it.

Having a periodic expense account is vital to the success of your budget. You make line items for all of your expenses, from groceries to clothes to the electric bill, PLUS an estimated amount for those unexpected expected items. If you know your insurance bill is $600 a year, you will put $50 a month into your periodic expense account so that when that bill comes you already have the money saved.
Plus you can estimate what you might need for car or home maintenance and repairs or other events. Then you set aside money each month, and when those things come up – voila! You have the money at your fingertips and can pay that bill without pulling out your hair.

So if there’s one thing you take away from iMoneyCoach today, let it be to open a periodic expense account! If you need help or have more questions about it, you can always contact us. You can also check out the iMoneyCoach University  where we have a Financial Life Training System that will teach you exactly how to do Periodic Expense planning, plus budgeting, getting out of debt, setting goals, and much more.

Tags: budget, financial coach, financial emergency, period expense account