Money is always tight at the start of the year, how do I avoid it?
Direct answerThe start of the year is tight because predictable annual expenses, like taxes, school enrollment and supplies, arrive at the same time as the holiday credit card bills. They aren't surprises, but they often get treated like ones. The first step is to list all your annual expenses and divide the total by twelve to save monthly.
How it shows up
January and February arrive with taxes, enrollment fees and big card statements, and you have to pay in installments or use credit to cover it all.
Most likely root causes
- Unplanned annual expensesBills that come once a year don't make it into the monthly budget.
- Year-end spendingGifts and celebrations paid in installments arrive along with the annual bills.
- Extra money already spentThe year-end bonus was spent before the bills arrived.
- No monthly set-asideWithout saving a little each month, the full amount has to come out at once.
Quick self-check
- Do you have a list of your annual expenses?
- Do you set aside a monthly amount for them?
- Did you use credit to pay last year's start-of-year bills?
- Did you pay for holiday gifts in installments?
If you answered yes to two or more, start with that cause.
First step today
List all your annual expenses today, such as taxes, enrollment, insurance and annual fees, with approximate amounts.
30-day plan
- Week 1: add up your annual expenses, divide by twelve, and set up a separate account or space for this set-aside.
- Weeks 2 and 3: schedule the monthly contribution and set a cap for year-end spending.
- Week 4: check for early-payment discounts and adjust the set-aside to match the actual amounts.
When to seek professional help
See a financial educator if annual expenses always lead to debt. Tax debts may have installment options through government agencies; incorrect charges can be disputed with your consumer-protection agency.
Frequently asked questions
- Should I pay my annual vehicle tax in full or in installments?
- It depends on the discount offered and whether you have the money saved without dipping into your emergency fund.
- What counts as an annual expense?
- Taxes, school enrollment, school supplies, insurance, annual fees and periodic maintenance, among others.