Planning for Irregular Expenses, Repairs, and Annual Bills

Most monthly bills are easy to plan for. Rent, food, and the light bill come each month, in much the same amount. The bills that cause stress are the ones that do not. A car repair lands with no warning. A home insurance bill comes once a year, and it is large. A water heater fails on a cold day. On a fixed income, one big bill can wreck a whole month. The fix is not to hope these costs stay away. The fix is to plan for them all year, in small steps.

This guide is part of our Aging at Home hub. Its sister guides cover creating a monthly budget on a fixed income, building an emergency fund in retirement, and organizing bills, subscriptions, and automatic payments.

Key takeaways

• Make a list of every bill you pay once a year, twice a year, or four times a year. Add the month each one is due.
• Turn each big bill into a small monthly amount. Divide the bill by the number of months you have to save for it.
• Keep that cash apart from your day to day funds, so you do not spend it by chance.
• Repairs have no set date. Use your past bills to pick a yearly amount, and save toward it each month.
• Medicare and Medicaid do not pay house bills or home repairs. Some local programs can help with set energy costs.

Why these bills catch people off guard

A monthly budget can look fine and still fail. It plans for one month at a time. It counts the bills that come each month. It can miss the bills that come once or twice a year.

The Consumer Financial Protection Bureau, known as the CFPB, makes the same point in its budget guide. One step is to list all your bills and when they are due. Its Bill Calendar tool helps you track due dates and spot the weeks when you need to be more careful with your cash.

Irregular costs fall into two groups. Some have a set date and a set amount, like a yearly insurance bill. Some have no set date at all, like a plumber visit or a new set of tires. Each group needs its own plan.

Make a full year list first

Start with a list for the whole year, not just one month. The CFPB has an annual planner tool for this task. It asks you to think through your income and your costs over a full year. It asks if there are bills you pay once a year, twice a year, or four times a year.

Go through last year, month by month. Look at old bank records and old bills. Write down each cost that is not monthly. Note three things for each one:

Common items are home and car insurance, property tax, car tags, and yearly fees. The CFPB planner asks about insurance and property, vehicle, or other taxes paid on a quarterly, semi-annual, or annual basis. It also names major buys like home repairs and new appliances as costs to plan for. Add gifts and travel if those are real costs for you.

When the list is done, put it where you will see it. The CFPB says to put the planner in a place you will see, as a prompt for when these costs are due. A fridge door or a desk drawer both work well.

• What the bill or cost is.
• About how much it was last time.
• The month it is due, or the month it last came.

Turn each set bill into a monthly amount

Now give each set bill a monthly cost. Take the full amount of the bill. Divide it by the number of months left till it is due. That is the amount to set aside each month for that bill.

Say a bill is due in 12 months. You set aside one twelfth of it each month. Say a bill is due in 6 months and you have saved nothing yet. You set aside one sixth of it each month. The first year can feel tight, since some bills come due soon. After the first year, each bill has had a full year of small saves behind it, and the plan gets much more smooth.

Add up the monthly amounts for all the bills on your list. That total is a real monthly cost, just like rent or food. Put it in your monthly budget as its own line. If you have not yet built that budget, our guide on creating a monthly budget on a fixed income walks through the same CFPB steps in full.

Keep the saved cash apart from your day to day cash. Some people use a second bank account. Some use cash in marked envelopes. Both work. The cash has a job, and you can see how much is spoken for. Our guide on organizing bills, subscriptions, and automatic payments can help you line up due dates and pay dates.

Plan for repairs that have no set date

Repairs are the harder group. You know a car and a home will need work. You do not know what will break, or when. A roof can leak. A fridge can quit. A car can need brakes. Still, you can plan for this group too. You just plan for the year as a whole, not for each job.

Look back at what you spent on repairs in the past two or three years. Add up the home jobs and the car jobs for each year. Take a rough mean of those years. That mean is a fair first target for one year of repair costs. Divide it by 12, and set that amount aside each month.

If the pot grows past your target, you can pause the saves for a time. If you draw on it for a big job, start the saves again the next month. This pot is close kin to an emergency fund, but its job is more narrow: the home and car costs you know will come at some point. Our guide on building an emergency fund in retirement covers the broader fund for true shocks.

A few habits cut repair costs in the long run. Fix small leaks fast, before they rot wood. Change the air filter on your heat and air unit on the schedule the maker sets. Get the car checked at each oil change: a worn belt found early is a cheap fix. Keep a short list of trusted pros — a plumber, an electrician, and a car shop — and find them now, not in a rush on a bad day. Get quotes in writing for big jobs, and ask what is and is not part of the price.

A short check of the home, four times a year, can catch small faults before they grow. Look at the roof line for loose shingles. Check under sinks for damp spots. Look at the water heater for rust or drips. Write down what you find, and put the big jobs on your year list with a rough cost.

What to do when a big cost lands early

At some point a big cost will land before the pot is ready. That does not mean the plan failed. First, ask if the job can wait, or if part of it can wait. A fix for a leak or a dead heater in winter must be done at once. A fresh paint job can wait.

Next, call the firm or office that sent the bill. Ask if you can pay in parts over a set number of months, and ask if there is a fee for that plan. Get the terms in writing.

Then look at your budget for short term cuts. The CFPB guide gives a like tip: look at your spending habits to find places to cut back. Small cuts for two or three months can free the cash to refill the pot. Do not skip drugs, food, or heat to pay a repair bill. If the bill is for energy costs, check the help in the next part first.

Who covers what

Medicare and Medicaid pay for health care. They do not pay house bills or home repairs. Those costs fall on you, on your repair pot, or on a local help program. Two federal programs can help with set energy costs, for homes that qualify:

Rules and open dates vary by state for both programs. Read the terms on the official .gov page for your state before you count on any help. Private pay and your own plan still cover most repairs and annual bills. The programs above are a backstop for energy costs, not a full plan.

• LIHEAP: the Low Income Home Energy Assistance Program gives federally funded help to reduce the costs linked to home energy bills, energy crises, weatherization, and minor energy related home repairs. The Administration for Children and Families, known as ACF, runs the program page. LIHEAP can help you stay warm in the winter and cool in the summer. It does not give direct grants to people, and it does not charge a fee for a benefit. To ask about help, visit Energyhelp.us or call the National Energy Assistance Referral line at 1-866-674-6327. Check any claim about the program on its official page at acf.gov before you share your details with anyone.
• Weatherization Assistance Program: the U.S. Department of Energy runs this program, known as WAP. It cuts energy costs for low-income households by making their homes use energy more efficiently, while keeping health and safety in mind. The Department of Energy calls it the nation's single largest residential whole-house energy efficiency program, and it has run for more than 40 years. Its stated aim gives special weight to people who are elderly, people with disabilities, and children. Check the details on its official page at energy.gov.

Sample Situation

The amounts in this example are made up to show how the math works. They are not facts about any real household or any real bill.

Marta is 74 and owns a small house. Her home insurance bill is $1,200 a year, due each March. Her car insurance is $600 a year, due each September. Her property tax is $900 a year, due each November. She adds the three bills: $2,700 a year. She divides by 12 and gets $225 a month. She puts $225 a month into a second account, marked for annual bills.

For repairs, Marta looks back three years. She spent about $1,800 on home and car repairs in a typical year. She divides by 12 and adds $150 a month to the same account for repairs. Her total set-aside is $375 a month. In June her water heater leaks. The quote for a new one is $1,100. She has $900 in the repair part of the account. She pays $900 at once and asks the firm to split the last $200 over two months, with no fee, and gets that in writing. She keeps her $225 a month going for the annual bills, so her March insurance bill stays safe. By fall, the repair part is growing again.

Your next step

When you want to see what care and home costs look like in full, so you can judge how much room your budget has, our Costs pages lay out typical charges by care type, with the sources for each figure.