Even though I track our net worth monthly, it can be difficult to determine exactly how well we are building our wealth due to large recurring expenses we have that do not bill on a monthly basis. For example, we may have saved up $1,000, but if it happens to be time to pay our insurance dues then all that may be gone. Also, our savings in later months will then be inflated. So I am going to try and smooth out these bumps by creating an account to send monthly payments too in preparation for an upcoming bill. So instead of a $600 bill in 6 months, I will put away $100 a month into a high-yield savings account and pay off the bill when it comes due with no spikes in our net worth.
First, I need to make a list of all the expenses and their billing interval:
Auto Insurance – Semi-annually
Renter’s Insurance – Annually
Water/Sewer – Quarterly
Phone – Annually (SunRocket VoIP)
Tuition – Quarterly
After adding these up and finding the average monthly bill, I just set up an auto-debit every month for that amount to an account that I won’t add into my net worth goal. I’ve been meaning to do this for a while, thanks to commenter Matt for reminding me in my last update.
Hopefully this extra trouble will help me better visualize our monthly expenses and help us better plan and save in the future.