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# Biggest budget breakers are periodic expenses

You may have a good idea of where your money is going on a day-to-day basis, but before you start working on a spending plan or budget, it is important to call attention to the number one budget breaker: periodic expenses.

Periodic expenses are those that are not paid on a regular monthly basis. For example, both holiday and tax debts are periodic, meaning they are not part of regular monthly expenditures. In that regard, they join the ranks of other expenses such as auto registrations and vacations. Often, it is known when these events will occur, but many still fail to plan for them. Unfortunately, when these expenses arise, many people rely upon credit to extend their monthly incomes; using credit this way is one sure sign of impending financial trouble. To avoid this scenario, follow these tips when planning for periodics:

• Determine what you spent last year for periodic expenses. Assume that you will spend at least the same amount again this year.
• Don’t hide expenses! Just because you don’t list an expense doesn’t mean you won’t have to spend money on it. Don’t forget things like back-to-school expenses, auto repairs, and birthday gifts.
• Remember that some items, like auto insurance premiums or property taxes, may occur more than once a year.

When you have a realistic idea of what you will need to spend on periodic expenses during the year, divide the total amount by 12 and save that amount each month. Designating a savings account for this purpose may help to organize the process. Check with your financial institution, you may even be able to have the amount automatically transferred.

Here are a couple examples of periodic expenses that can significantly impact your monthly budget:

Annual auto registrations
Assume your annual auto registrations cost \$800/year. How much should you budget each month to cover this expense (even if you don’t have to pay it monthly)? \$800/12 = \$67/month

Property taxes
If you own a home, assume your annual property tax bill comes to \$1,200. This sum may be due only once a year, but you should be putting away an amount each month to pay these taxes. \$1,200/12 = \$100/month So, to be prepared for these annual expenses, you must put the calculated amounts into a savings account, or into an “auto registration” or “property taxes” envelope, each month. That way, you will not have to rely on credit or depleting your emergency savings when the bills come due.

• The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
• The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

• Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

• The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

• The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

• The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.