Dividing large bills into smaller chunks can make them much more manageable.
They say the best way to eat an elephant is one bite at a time. The point is, that when you look at the size of the thing, it is overwhelming, but by working at it one small bite at a time, you will make progress and eventually you will complete the task. The same principle applies to our finances. Be it saving for retirement, eliminating your consumer debt, or paying a huge bill.
In our state we have to pay taxes on our personal property. So, at the end of every year we owe a few hundred dollars in property tax for our cars due on December 31. A bill for $350 can be challenging at any time, but right after the Christmas spending spree makes it even more difficult.
The great news is that for $29.16 a month I can have all of the money saved up for that bill when December rolls around again. This is part of my budgeting with ING Direct that I use. I create a savings account for each “elephant” sized bill and divide by 12 to figure out how much I need to save on a monthly basis. A side benefit is the interest that is being earned all year long on that savings.
If you haven’t tried saving up for large bills, I promise that you will absolutely love the feeling you get when you do. It almost makes me excited when the bill comes in, because I don’t have any question of where is the money coming from. It has been sitting in a savings account just waiting all year for that bill to come in.
I use this method with car insurance premiums rather than using the monthly rate that some companies offer. Normally there is a fee charged for the monthly billing option and you can save yourself a few bucks a month by paying the 6 month premium all at once.
Get started with these other posts… How to make a budget, 10 free budget spreadsheets, free budgeting software
Oh and don’t forget to use the interest you earned to take yourself out to lunch, because you’ve earned it. 
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I’ve just started to do this for my car registration and roadside assistance annual membership. Both caught me out this year, so I’m looking forward to just paying them when they come round in 2008 without batting an eye.
My insurance (home, car & health) doesn’t charge extra to pay by the month so I just pay those by direct debit.
Very nice idea–that should certainly smooth things out.
And debtdieter, I didn’t know anyone let you do that–I’ll check that out. It’d be even easier, though without the interest.
Another benefit of this, is where you add some more of those yearly type expenses to your savings plan. Now you might be putting aside a little more, but you can handle several $300 blips throughout the year.
So, you might have 4 of those $300 expenses, and be saving for all of them. When one comes up, you have a pool of money to draw from to cover it (and not use credit), but that month’s contribution is unchanged, your monthly budget isn’t impacted at all. You might handle $1200/year with a savings account that’s only $300-400 at any given time… and only $100/month.
I hope that’s clear. In essence, you wind up financing your own expenses, just by saving a fixed amount every month.
@debtdieter
That is great that they let you pay monthly without the fees…
@Ted
I am with you on that – I do a variation of that with a few things in my budget – it just feels so good to have the money sitting there when you need it!! Doesn’t it?
@bob
Oh yes, wonderful. And when it comes time it is so nice to take a vacation knowing you’ve got the money, knowing it was set aside for that purpose, and then being well able to enjoy every moment. Yes, we can buy that, or yes, we can go to that nice(r) restaurant. It would be hard to understate the joy of a relaxing vacation coupled with an ample wad of vacation-budget-money.
Great advice!
I respect his opinions as well. I just wish he wouldn’t make so many comments about recession…makes the markets jittery.
-Raymond
Very nice post. I used to pay my home and car insurance yearly and twice per year, respectively. Now it’s automatic monthly withdrawal with no fee…much nicer.