One of the core principles of personal finance is budgeting. Through a solid budget, you can make sure that you are meeting all of your financial obligations, saving according to your goals, and leaving enough money for fun. Unfortunately, budgets are not always airtight, and we may forget to include certain items that put financial pressure on us down the line when we have an unexpected expense.
Many of the expenses that catch us by surprise are annual ones. We tend to think of budgets on a monthly cycle, and it is easy to forget charges that come less regularly. Some of the common annual expenses you may be leaving out of your budget include:
1. Car Registration
While you may budget for the cost of auto repairs or include it as part of your emergency fund, do not forget that you need to pay annual fees to operate your vehicle. Almost all states require you to pay an annual fee to keep your vehicle on the road and this cost can total hundreds of dollars depending on the circumstances.
Also, many states also require you to get your vehicle inspected annually, which is another fee you need to account for in your budget. Some states even require people to pay property taxes on cars. Make sure you anticipate the costs of driving behind oil changes, maintenance, fuel, and repairs.
2. Tax Preparation Fees
Depending on your circumstances, you may need to hire an accountant to prepare your taxes. This can cost hundreds or even thousands of dollars. If you have a very simple situation, you can often file for free.
However, your situation tends to get more complicated over the years as you buy property and make investments. Even tax preparation software can be fairly costly. Be sure to think about your situation as it becomes more complicated and that you prepare adequately for the cost of filing your taxes.
3. Membership Dues
Many people belong to various stores, clubs, and organizations that require an annual membership fee. Forgetting about these fees is very easy since the bill only comes once a year, but the amount can still put some pressure on your finances, especially if you need to pay for more than one at once.
Also keep in mind that some of these fees get charged automatically on a credit card so you can forget them altogether until the statement comes. Keep track of the annual membership fees you need to pay and be sure that you know when each different bill will become due.
4. Vacations
While you are not likely to forget about a vacation, the associated costs can sneak up on you if you are not actively planning for them. Ideally, you are saving for vacation through one of the lines in your budget. However, you also need to be proactive in ensuring you are saving enough money for what you really want to do.
You do not want to have to compromise your vision down the line or end up going into debt to make your trip possible. The best practice is to create a completely separate budget for your vacation, which will help you know how much you need to save for your particular plan. Then, you can divide this amount across the months to make sure you are hitting the proper savings goal.
5. Vet Checkups
We often think of pet bills in terms of emergencies for when they get sick. However, our pets also need annual checkups with their vets. These checkups are important for ensuring that shots are up to date and for preventing diseases in the future.
The downside is that these checkups can sometimes run hundreds of dollars per pet, so the money can really add up if you are not planning for it. For each of your pets, make sure that you are thinking about their annual preventative health in addition to any emergencies that might arise over the course of the year.
6. Property Taxes
If you have a mortgage, your property taxes are rolled up into the monthly payments that you make. You should pay attention to the line that shows how much of your monthly payment is associated with property tax because you may be surprised. You are still responsible for this tax payment even after you pay off your home’s mortgage. If you fail to pay it, you may end up forfeiting your home to the state.
Additionally, property taxes are billed annually rather than monthly, so if you are not planning for the expense, you can really be taken aback by the bill you get. Your best bet is to treat property taxes as a monthly expense and deposit money into an account each month. Then, when the bill comes, you have the funds to cover it.