Budgeting Process : Regular vs. Periodic Expenses

Regular expenses occur on a regular basis. For example, you are charged rent or a mortgage every month. You anticipate these expenses and can plan for them.

Periodic expenses do not occur on a regular basis and can sneak up on us at a time when we don’t have the money. Classic examples of periodic expenses are birthdays, vacations, and holidays (Christmas, Hanukah). When these periodic events occur, we often have not planned for them so credit cards, payday loans or other costly modes of credit are sometimes used to pay for them. The bill can end up being many times greater than the price you paid. (That’s how a $5,000 credit card bill can cost up to $40,000 and take 45 years to pay off.)

The solution: think through all the periodic expenses in your life and put them in your budget. Plan for them. Another good strategy is to establish a savings account that you can utilize for periodic expenses rather than a costly credit card. Your savings will help you cover any unexpected expenses too.