What Home Sellers Can Legally Hide and How to Master Irregular Bills

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17:23Sean Pyles:With Quince, it's not just the apparel. Quince also offers elevated essentials for your home, from bedding, like I mentioned, and bath, to kitchen essentials and furniture.

17:32Elizabeth Ayoola:Make your summer wardrobe feel easier. Go to quince.com slash smartmoney for free shipping on your order and 365-day returns. It's now available in Canada, too.

17:42Sean Pyles:That's quince.com slash smartmoney for free shipping and 365-day returns. quince.com slash smartmoney. We're back and answering your money questions to help you make smarter financial decisions. This episode's question comes from Alyssa, who sent us an email. Here it is. Hi, Elizabeth and Sean. I love your podcast, and I've been learning a lot from it. I have a budgeting question for our family. My spouse and I make good salaries, around$180 ,000 to$200 ,000 per year, and we don't spend extravagantly, but our budget always feels tighter than it should. I've been working to better track our expenses, and one thing that consistently confuses me is how to plan for irregular bills.

18:21Sean Pyles:For example, we have an annual$2 ,000 oil bill, a quarterly water bill that fluctuates, and an easy pass charge that pops up unpredictably. We'd really prefer a set-it-and-forget-it approach rather than daily expense tracking, something that keeps us organized, helps us plan for a regular cost, and allows us to consistently save for bigger goals like a home addition. Right now, our savings just keeps getting eaten up. Do you have advice for how to budget for regular expenses in a way that smooths things out month-to-month and makes it easier to build savings with confidence? Thank you for considering my question.

18:52Sean Pyles:I'd love to hear your take. Alyssa.

18:53Elizabeth Ayoola:And this episode, Sean and I are taking on Alyssa's questions ourselves. Are you ready to dive in, Sean?

19:00Sean Pyles:Let's do it. Let's start by talking about some common irregular expenses. A lot come to mind, actually, because I face these every single year, it seems, and they're always annoying and throw me off. So car registration is one that I just paid. Maybe premium credit card annual fees. I know, Elizabeth, you and I were just talking about this and how expensive it can get. But also pet insurance, magazine subscriptions, oil changes, back to school supplies. Not so much my thing, but probably yours, Elizabeth. Also neighborhood dues, home maintenance. There are so many. Do any other come to mind for you?

19:32Elizabeth Ayoola:Definitely some that you have brought up. You called me out and told my business. Maybe I told my business already on this podcast. But premium card annual fees are definitely one for me. I have four too many of those. Definitely back to school supplies. An interesting one for me actually is because I'm a single mom of when I want to go out or even just when I want to travel on a trip without my son, I have to pay babysitter fees, which can get really expensive. And I don't always necessarily plan for car maintenance, beauty products, because a girl has to girl.

20:01Sean Pyles:Yeah, but you run out of a product and you have to replace it and you don't know exactly when that's going to happen, right?

20:06Elizabeth Ayoola:Yeah, and then it just so strangely happens that they all run out around the same time and then it becomes this big expense bill. Like I need eyeliner and face wash and shampoo and just all the things at once and it can cost quite a bit.

20:17Sean Pyles:So I looked into my own irregular expenses ahead of this recording. Do you want to guess how much I spend on an annual basis?

20:25Elizabeth Ayoola:I'm going to say$5 ,000.

20:28Sean Pyles:Not quite. I spend a little over$3 ,500 a year on annual expenses. And that's a lot more than I was expecting it to be. Although admittedly, most of this expense comes from my pet insurance, which is around like$2 ,200 a year. So yeah, I just wasn't expecting to have that number. I thought it would be maybe closer to$1 ,000, but all of those things that we just listed out really add up over time. Do you have a number for how much you're spending on your irregular expenses annually, Elizabeth?

20:56Elizabeth Ayoola:Probably around the amount that I was projecting, Sean, which was$5 ,000. So I was putting that on you, but it was really on me.

21:03Sean Pyles:Yeah, that's a lot. I'm guessing a good chunk of that is coming from your credit card annual fees.

21:07Elizabeth Ayoola:Yep, credit card annual fees. And then a lot honestly goes to child care.

21:10Sean Pyles:Well, I think it's telling, too, that you don't have a precise number and that I didn't before I looked into it to answer this listener's question because these things do pop up. We don't think about them on a regular basis until all of a sudden that charge hits our account and we're like, oh, crap, I have to scramble and move some money around to cover this bill. So we should talk about how you can account for these expenses given that they can be kind of unpredictable or they seem like they can be unpredictable. I think to start, the best place for people to look is just their spending. They can look backwards at what they have been spending their money on for the past few months.

21:42Sean Pyles:As you're looking through your charges, flag anything that seems, quote unquote, irregular. And I'm saying, quote unquote, because at the end of the day, there isn't actually a big difference between an irregular expense or a regular expense. An irregular expense is just one that popped up unexpectedly that you maybe forgot or you weren't totally planning for. Although if you have foresight and you look at your expenses closely enough, we should all be able to plan for these things. We know they're coming, right?

22:06Elizabeth Ayoola:Absolutely. And actually, this reminds me of a regular expense dilemma that I was having with my small business, which is that I had those kind of unexpected fees coming up as well. So something I did was I created a spreadsheet. It was easier to look through because my business credit card expenses are not as much as my personal one. So I was able to kind of highlight each of those quote unquote irregular expenses and pop them in a spreadsheet and also put the date next to it of what time of the year they come around so that I can anticipate them. So maybe that's something people can consider as well.

22:37Sean Pyles:That's really smart. I think people can either track them either through a spreadsheet or a note on their notes app on their phone. Something so that if and when these expenses do pop up, you can just keep track of it in that moment. And then hopefully next time this expense comes around, you know to anticipate it because you have it written down somewhere. And also you flagging your business expense makes me think about how next year I'm going to be facing a bunch of irregular expenses with my business and my CFP certification. And that stuff is not cheap. So I'm going to start saving for that probably today.

23:06Elizabeth Ayoola:Yeah, even just the annual business registration fee, not to get too much into business stuff. But my website domain comes up, you know, every year and then you're like, whoa, another bill.

23:14Sean Pyles:Well, one thing that's hard to figure out as well is how you can track irregular expenses when the price can fluctuate. Like a water bill might not be the same every month or every quarter, depending on how frequently you're billed. So in that case, it's a good idea to try to get an average for how much you might be spending. So look back at your last three or four bills, see what you're typically spending. Also see if you might be getting a price increase coming up because we're getting that for our water bills here in Portland. Get some sort of grasp on what you might have to spend. That way you can plan for it, even if you don't know exactly how much it's going to cost you.

23:47Sean Pyles:And I I would also suggest putting in a cushion in your budget to save maybe more than you might expect so that you don't end up not having enough set aside for it.

23:54Elizabeth Ayoola:And I think that's a good segue, Sean, because everyone has a different budgeting system, right? And I think your budgeting system is going to determine how you manage those irregular expenses. So someone like you who has five million different accounts, you might have an account for each bill or whatever it looks like. But for someone like me who has only two checking accounts and one savings account, I find my approach is, like you said, having enough money in my account, knowing roughly how much my monthly expenses are, and then having that extra cushion, right, for those unexpected bills so that I'm not robbing Peter to pay Paul.

24:25Yeah.

24:26Sean Pyles:And for something like Alyssa's$2 ,000 oil bill, I would probably put it in my home maintenance fund. And then they can break that up on a monthly basis and see what amount they might need to put aside into that account so that it's all covered. That's just one easy way. And that's probably, again, how I would do it. But one thing that I'm thinking about is how Alyssa mentioned that their budget always feels tighter than it should while they're making between$180 ,000 to$200 ,000 a year. And we don't know a lot about their household finances. We don't know where they live, what their mortgage costs, all of this.

24:58Sean Pyles:But I am willing to bet that they probably aren't tracking their expenses as closely as they might think they are. And this is kind of a open secret in the financial planning and personal finance world, which is that most people, when they're living a pretty comfortable middle class life, aren't really budgeting that closely at all. And that's okay because you have enough money to get by. But then when you're facing a cash crunch like they are facing, it's time to look into what's really going on and track your expenses more closely.

25:27Elizabeth Ayoola:I agree. I had a moment like that between the end of last year and earlier this year where I was like wait a minute Where's all my money going? Because I got so comfortable kind of like, you know, this couple is and it was a daunting and also Freeing freeing experience to really sit down and I did something which is track my expenses for a month and see exactly What I was spending I started checking every single week to see how many uber eats I was doing how many instacarts And I was like girl you're doing too much So that can help you see where, and I was like, I do have enough money because I started to feel like, oh, I need more money.

25:59Elizabeth Ayoola:No, I just needed to manage the money I had better. So I think tracking the expenses really closely to see where it's going is a good place to start.

26:06Sean Pyles:How exactly was that freeing? Because it sounds kind of tedious, to be honest.

26:10Elizabeth Ayoola:It was tedious, but how it was freeing is first of all, I was stressed out because I didn't know where my money was going and I was avoiding checking where my money was going. And it was also freeing because I had all this pressure on myself because I was feeling guilty because I didn't know where my money was going and because I knew that I was possibly overspending. But being able to track and see where all that was going helped me to feel free from all of that stress and all of that guilt because now I know where my money is going and what I need to fix and I have a clear path forward.

26:35Sean Pyles:It's like you had this budget boogeyman in your life. And once you confronted it head on, you were able to take more control over your finances.

26:43Elizabeth Ayoola:Exactly. Exactly.

26:44Sean Pyles:Okay. And so how did you change the way you're tracking your money? Are you still looking at it on a kind of close basis like you were for that month? Or have you gone back to a kind of more relaxed pattern?

26:53Elizabeth Ayoola:Oh, no, we're not going all the way that way relaxed. So now I check weekly, actually. I see exactly what I'm spending weekly. And then intuitively, I'm able to say, hey, maybe I'm going to spend less next week. Or this is kind of my budget for the rest of the month.

27:06Sean Pyles:And that's a good idea. So with Alyssa, they could track every expense for a month, see what's coming in, see what's going out, just get a really clear picture on where they might be succumbing to some kind of lifestyle creep like all the Uber Eats or shopping for clothes, whatever it might be. We all have our own little lifestyle creeps that are not necessarily bad, but they can become troublesome when it prevents us from not being able to save how we want to or cover our expenses in Alyssa's case. So once they get a feel for that, then they might want to try a budgeting method that is kind of relaxed because it seems like they don't want to be micromanaging their finances on a regular basis.

27:40Sean Pyles:In that case, you know, I like to recommend the 50-30-20 budget framework, which we talk about a lot for a good reason. If you have your 50-30-20 budget where half of your income is going to cover your needs, 30 % is going to wants, 20 % is going towards additional debt payments and savings, this is a way where you can ensure that you have some kind of financial and budgeting balance. And if your money is fitting into these categories neatly, then you can kind of set it and forget it, have your money going to your different expenses and not have to worry about every single thing that you're spending money on.

28:10Elizabeth Ayoola:Yeah, because it can be time consuming. So Sean, I want to know, have you experienced any type of lifestyle creep? What was that like for you if you have?

28:18Sean Pyles:I kind of love lifestyle creep in a responsible way. That's why when I bought a car in 2020, I bought myself a very affordable BMW because I drove crappy cars my entire life. In high school, I had a Honda Civic where the muffler was rusted out and dragging on the ground behind me. It was Oh, dear. A mess. Yeah, it was really bad. So I said, okay, I have a big boy job. I'm earning some money. I can fit this luxurious car into my lifestyle and my budget. And, you know, it was affordable for me. My monthly payment was like$350 a month, which is nothing for a car. Yeah. Exactly. So I'm all about having thoughtful lifestyle creep.

28:54Sean Pyles:So think about where your priorities are. For me, I wanted a nice car. I also like buying some nice clothes. I don't have a child that's taking up my money or a really big housing payment. So I have the freedom in my finances to allocate things to where I want to indulge a little bit. And that can be a nice vacation every once in a while, too. So, yes, I like lifestyle creep, but I think you need to be really considerate about how you're doing it.

29:17Elizabeth Ayoola:I like that framing. So it's almost like you're using lifestyle creep as a way to say, hey, I can enjoy a bit more of my money now that I have more money.

29:25Sean Pyles:One thing I go back to a lot in personal finance is that it's important to plan for tomorrow, but also live for today, too, because there is no promise of tomorrow. But you want to, of course, cover all your bases. So enjoy things while you can. Go out to that nice meal. Treat your partner to a nice evening out. Whatever is important to you, but just make sure it fits into everything else you need to do with your finances. That's right. What about you, Elizabeth? What's your big indulgence? Is it the Uber Eats?

29:50Elizabeth Ayoola:I feel like I talk about Uber Eats a lot. Do I sound like a greedy girl? We are not sponsored by Uber Eats, by the way.

29:57Sean Pyles:She's organic.

29:59Elizabeth Ayoola:Honestly, I would say my biggest lifestyle creep was no, just escaped from my vocabulary suddenly. Hey, wanna go out to eat? No. Hey, wanna go on vacation? I mean, yes, yes, yes, there were no no's. I was saying yes to everything and not checking with my budget first because I was like, I think I have enough money to do all of these things. And maybe I didn't have enough money that month to do all of the things.

30:21Sean Pyles:Right, and that's where the lifestyle creep becomes problematic. So again, Alyssa, we don't know what your household finances are like, but I suspect there might be some kind of lifestyle creep going on. Think about where you can cut back and find some extra money in your budget to cover all of these unexpected irregular expenses. Okay, well, something else that Alyssa mentioned is wanting to have a set it and forget it approach to savings. And I am the master of doing this because as you said earlier, Elizabeth, I have about 20 ,000 savings accounts at the moment. No, I really only have nine that I'm currently using.

30:55Sean Pyles:And that might sound extreme, but let me just list them out. I don't think it'll sound as wild as you might initially think. So going in order, I have my emergency fund. I have my wedding fund, which is being quickly depleted as I spend more and more ahead of my wedding in less than two months now. I have my house maintenance fund. I have a student loan fund. I have a fund for taxes. I have one for my car, for car maintenance and for my future car. I have one that's just fun money. I also have a checking account at a credit union. That's kind of my day-to-day spending. I also have an old checking account from high school that I pretty much just used to pay my mom my part of the cell phone bill.

31:33Sean Pyles:And that's it. That's where my money is going. And I have a little bit of my paycheck every single pay period going into each one of these accounts based on percentages.

31:42Elizabeth Ayoola:You can add nine?

31:43Sean Pyles:Yes, actually. So with NerdWallet system, they say you can add 10. But guess what? I did that one time and I broke the system. So you can't do 10. But you can do nine. This way, I have just different percentages of my paycheck going into all of these different areas. And I don't even have to think about it. It's happening in the background on autopilot. Super easy.

32:01Elizabeth Ayoola:Well, I do have one question for you. Do you ever find that you end up co-mingling? Because this is a common issue I hear for people who are having budgeting issues, which is like, I didn't have enough in my check-in. Then I had to take it from my savings or I had to take it from that account and put it in this account. So do you ever have that issue?

32:15Sean Pyles:I have had that issue, especially with some of these irregular expenses. Like this past August, my annual pet insurance bill came and I just pay it all at one time. And it was, again, like$2 ,200 or something. And so I didn't have enough money in my checking account to cover that. So I pulled it from my house maintenance fund because my pets are part of my house. That's how I girl math justified it to myself. But I'm thinking that in general, I want to get better about having my irregular expenses accounted for because Alyssa's question was kind of a wake-up call for me too. So in the future, I'll probably put that into my emergency fund account and just pull it from there, even though it's not technically an emergency.

33:00Sean Pyles:But it's a place where I have a pot of money that I know has a designated purpose outside of typical day-to-day spending.

33:06Elizabeth Ayoola:And something I will say further for anyone who's thinking about adopting Sean's wild idea is that you may want to budget again. You're going to have to go through, but you're going to have to, I think, budget for each of these expenses. And then maybe you automatically save, I don't know, if you want to put$50 for your pet bill. I'm sorry I made that up. I have fish. Maybe that applies to me. Maybe you're putting$5. I know, right? Maybe you're putting$5 into that account a month in order to meet that bill. So you're going to have to time it properly and also plan your savings.

33:35Sean Pyles:So with this, there's a little bit of admin work on the front end, understanding where you need your money to go to cover all of your expenses, and then setting up the direct deposit if your employer graciously allows you to do so like NerdWallet does. Thank you, NerdWallet. But if they don't allow you to do that, you could also just do automated transfers from your checking into a different savings account each pay period. This is really the pay yourself first method of savings where before the money is even available for you to spend it, you have it just quickly shot into whatever savings account that you want and you just ensure that savings is going on in the background.

34:07Sean Pyles:And that's just what I do personally. Elizabeth, how do you handle this? Because I understand that you don't have nine checking and savings accounts.

34:13Elizabeth Ayoola:I do not. So I am a lump sum girl. I love to see big sums of money going somewhere, usually into my savings. So I save quite a chunk, maybe around, let's say, a thousand dollars a month into a general savings account. And then when I need to use it, I just pull it out. So I just save large amounts and use it whenever it's needed. Okay.

34:33Sean Pyles:But you're not sweating, oh, I'm pulling this a couple hundred bucks for my son's expense from my lump sum. some and you're not worried about that getting in the way of saving for another goal that you have like a vacation or something.

34:44Elizabeth Ayoola:No. Okay.

34:46Sean Pyles:That's fine because you know where your money is going. So if you are a little bit, I don't want to say loosey-goosey, but a little bit more flexible than my potentially more rigid way of saving, that's okay to each their own, right?

34:56Elizabeth Ayoola:Exactly. Exactly. And then on months, so if I'm planning for a vacation, for example, I will plan a couple of months ahead for that and then I'll budget like, hey, maybe I need to put aside a little extra money into my savings for that so that when it's time to pay for it, I have enough.

35:09Sean Pyles:All right. Well, Alyssa and all other listeners who struggle with irregular expenses, Elizabeth and I included in this. I hope this has been helpful. Let us know what you end up doing with your finances because it's something that we all struggle with.

35:20Elizabeth Ayoola:That's right. So I'll be taking some tips from what we learned today or what we taught y 'all today, and I'll be using them in my personal finances too.

35:27Sean Pyles:And keep us posted, Elizabeth.

35:29Elizabeth Ayoola:You too, Sean. We're holding each other accountable here.

35:31Sean Pyles:Yes, exactly. Accountability partners here. Well, that's all we have for this episode, remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdball.com.

35:49Elizabeth Ayoola:Join us next time to hear about how much life insurance you might need. You can follow Smart Money on your favorite podcast app that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

36:01Sean Pyles:Here's our brief disclaimer. We are not your financial or investment advisors, this nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

36:11Elizabeth Ayoola:This episode is produced by Tess Viglin and Anna Howalski, Hillary Georgie helps with editing, Nick Kersmey mixed our audio, and a big thank you to NerdWallet's editors for their help.

36:20Sean Pyles:And with that said, until next time, turn to the nerds.

36:41Toast.