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stacks of coins
Photo by Jeff Belmonte

Many of you have written me with this question – how do you budget for annual expenses when you don’t have a regular income, or when you don’t get paid monthly?

Budgeting might seem a bit easier for us because my husband gets paid monthly – one paycheck to one monthly budget. But it’s not really that much different than if we were paid bi-monthly or weekly, even though most bills are due once a month.

Just like using a sinking fund account to set aside money for those irregular, annual expenses, you can create accounts to build up funds for your monthly bills.

One of the main reasons I use ING Direct as our main bank is because it is incredibly easy to set up as many savings accounts as we need. All tied to one main checking account, we have a myriad of savings accounts set aside for all sorts of expenses. ING allows you to name each account whatever you want, and you can transfer money between the accounts instantaneously.

If you pay your mortgage each month, but you get paid bi-monthly, simply set aside half of your mortgage each paycheck into a sinking fund labeled “mortgage.” If you pay your auto insurance every three months, and you get paid every week, determine the number of weeks in three months – 12, usually. Each paycheck, transfer your insurance premium total, divided by 12, into a sinking fund labeled “auto insurance.”

How It Works For Us

When our paycheck comes to our checking account via direct deposit, we immediately allot our designated funds to their appropriate savings account – and quite often, we use the handy automatic transfer feature to handle our regular sinking expenses. Right now, we have four accounts, and they all serve a specific purpose. Here’s what they look like at ING:

1. Holidays and Gifts

Each year, we decide how much we will spend on Christmas, and we simply divide that total by 12 – that’s the amount we automatically transfer each month to our Christmas account. Very simple.

We then decide how much we will spend on birthdays, Mother’s and Father’s Day, our anniversary, and holidays like Thanksgiving and Independence Day. We don’t predict every penny – we just pencil out estimated expenses and round to the nearest dollar. We total that up, and divide by 12.

And finally, we guesstimate how many babies and weddings will cross our relational paths that year, and tack on about $15-$20 per event – and then divide that total by 12. The sum of all those monthly numbers become our regular, automatic transfer into our holidays and gifts account.

2. Giving

We give ten percent of our income to our local church (our tithe), and because we have a set salary, we automatically withdraw the same amount in cash at the beginning of each month.

But each year, we also decide how much we’ll give above this amount, both to planned charities and to unexpected burdens to give (we like to give a big tip to a waitress each Christmas, and sometimes we want to donate to a great cause with an urgent need). This is an amount we pray over, so it’s more of a spiritual issue than a math one for us. We take this total, divide by 12, and have this amount transferred to our giving account each month.


My daughter playing near my feet at a nearby beach.

3. Vacation

Our vacation fund is pretty laughable, but because we live overseas, we want to take advantage of our locale while we’re here – even if it means just a few day trips here and there. But we can’t have those vacation weekends on a whim if we don’t have the funds set aside.

We decide on a set amount each year, divide by 12, and then have that amount automatically deducted into our vacation fund. We let this account build up gradually, and we use the amount in there determine how we spend it. So if we feel like checking out a nearby village that gets cool reviews in the travel guide, we’ll look at our account, and use that number to determine whether we stay for the night or just make it a day trip, whether we rent a car to get there, or whether we take our slower-but-cheaper public transportation system.

4. Work Expenses

My husband sometimes has work expenses that we need to pay for out of pocket until we get reimbursed. For this, we transfer a regular amount each month into our work expenses account, so that when he needs to pick up an unexpected printer cartridge for his office, it’s not cutting in to our family’s grocery budget. We’ll purchase the needed item using our checking account, and then that day, we transfer the spent amount from the work expenses account to our checking account – thus reimbursing ourselves, in a way. And when his company cuts him a reimbursement check, we put it into our work expenses account, ready for the next purchase.

5. Online Profits

spring cleaningMy Paypal account is tied directly to our online profits account – so when I get paid from an Etsy buyer, an advertiser, or when one of you buys my ebook (and thank you, by the way!), the funds go directly there. We don’t actually live on any of these profits – all online-earned money goes to our long-term financial plan a la Dave. For this reason, we like it to go directly to the online profits account first, instead of our everyday checking. We don’t want to accidentally use that money at the grocery store – but if we ever need to, we can instantly transfer money from this sinking fund into our checking account with no waiting.

6. Emergency Fund

And finally, our basic Emergency Fund is also housed in a simple savings account with ING. We don’t touch this unless there’s, well, an emergency. And because we make a zero-based budget each month, an emergency rarely happens. But when it does, we’re ready.

Photo by d70focus

Why I Like Internet Banking

There are a wide variety of online banks, but we ultimately chose ING Direct because most of the personal finance blogs I trust recommended ING. And we’ve been incredibly happy with them – their customer service is top notch, and their website interface is extremely easy to use. When you call, you get a real live person who’s not annoyed that you’re interrupting their solitaire game.


Click here to start saving with ING DIRECT!
With an internet bank like ING, you still need a traditional brick-and-mortar bank to handle your incoming paper checks. Because ING doesn’t have traditional bank locations with tellers needing a paycheck, they can pass on a decent interest rate to their customers. It’s gone down in recent months, but their current savings rate is still better than most traditional banks’ basic savings accounts.

Making It Work For You

So for those of you who don’t get paid monthly – and even for those of you who don’t get paid the same amount each pay period – you can make sinking funds work for you. Instead of diving by 12, like we do, divide by the amount of paychecks you receive each year. So if you get paid every two weeks, divide your annual totals by 26. Then make your automatic transfers happen every two weeks.

If your income fluctuates, determine your annual expenses’ percentages. To make things easy, let’s say your annual Christmas budget is $500. If you get paid $400 one week, determine the percentage alloted to Christmas for that paycheck.

It might seem like a pain to allocate these funds with every single paycheck, but when you have a banking system that transfers money seamlessly and instantly, it only takes a few minutes. Those few minutes are certainly worth the peace of having your Christmas funds effortlessly ready for you come December. And when money allocation becomes one of your regular home management tasks, it just feels like part of your job as a steward of your family’s finances.

How do you set aside funds for irregular expenses? Do you prefer digital tools or pen and paper?

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