Paying for special occasions

This post was featured on the Carnival of Personal Finance

When you’re trying to stick to a budget and save money, one of the biggest issues that can come up is a special occasion. A wedding, a birthday, a baby shower… these things can all wreak havoc on your budget unless you plan carefully. Whether or not it is correct, there are a lot of implicit expectations when it comes to these types of events. New parents might expect contributions towards clothing or a stroller. A bride might expect a bridal shower or gifts or parties. In Asian families, it’s expected that guests will give large amounts of money to the host family – for any occasion. On top of that, you need something nice to wear to the event itself! How are you supposed to pay for this stuff?!

Original by D Sharon Pruitt at http://www.flickr.com/photos/pinksherbet/5821119602/in/set-72157610551917961

Brian and I have an irregular savings account that helps with some of these issues. We add money to it each month in order to pay for recurring but irregular expenses such as gym passes and clothing. Part of it is allocated towards travel and gifts, which we are able to use when presented with an invitation to a special event.

Here’s how it works. Every month, we transfer a set amount of money into an “irregular savings account”. I keep an Excel sheet which details different types of expenses. Currently, mine lists: Clothing and Shoes, Hair, Sports, Gifts, and Travel. On the spreadsheet, I record how much money was transferred into the account and divide it between the columns as needed. If I made interest, I add that amount to a “Miscellaneous” column until there is enough to move it somewhere else. As a result of doing this, we’ve always had money for things like haircuts and clothing!

How do you figure out how much you need to save per month? Well, you need to get an idea of the average amount of money you spend on recurring items over the course of the year. Then, divide by 12 to figure out how much you need to save each month. For example, I might decide that in a year, I need 4 haircuts ($50 x 4), 1 new pair of shoes ($100), 2 gym passes ($75 x 2) and occasionally new clothes each season ($50 x 4). Maybe I also want to save money for gifts, such as birthdays ($50 x 4) and Christmas ($500). Of course, I need to allocate money for travel ($650). Based on these numbers, I would need $2000 or $167 per month. I would then round that up to $200, to make sure that I had a bit of buffer. If that’s not a realistic amount based on your current budget, then you need to rethink how much money you can spend on things like clothes and travel.

But sometimes you don’t have enough money in your irregular savings to pay for everything. This usually happens for me with travel and gift expenses. Then you need to use your spending money, make more money, or… cut back. And it sucks to not be able to give a lavish gift or attend the get-away vacation, but keeping your financial house in order is more important than putting yourself into months of financial catch-up.

In these situations, I would first consider my spending money. Can I cut back on my weekly spending enough to put that money towards the event? Perhaps if I spent $20 less for the next x number of weeks, I would save enough money for that plane ticket! If not, I would then look at making more money. Can I find a casual gig or several casual gigs to make myself enough money for this event? There are lots of options for side jobs out there and chances are, I could probably find something! But it still might not be enough. If this were the case, I would probably decline the invitation and send a card or small gift in lieu of my attendance.

What would you do when faced with an invitation? Do you keep an “irregular savings” account?

Posted in: Money

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15 Comments

  1. Modest Money says:

    Personally I’m pretty disorganized with my finances. I know…I’m a bad personal finance blogger. I swear one of these days I’m going to give budgeting a shot. Currently I usually just have enough cash easily accessible in a quasi emergency/splurge fund. So when that kind of stuff arises I can usually still afford it. Of course my money would probably go a lot further if I was more strict, which is why I really need to get started on budgeting sometime soon. My procrastinating side is just too strong.

    • CF says:

      Having any money set aside is a good start! We didn’t use to plan out our irregular expenses so strictly, but we got tired of not having enough money when we needed it for things like the gym or haircuts.

  2. I love the idea of the irregular savings account. I set aside money for big things I know are coming up, much like the sacrifices in your spending money. If I can’t get someone the best gift ever, I don’t sweat it. I do what I can and try to make sure it has some meaning attached.

  3. We generally have one big slush fund – we are saving for a big trip but we use part of our TFSA for that.

    Good idea to keep it separate.

    • CF says:

      Yeah, right now we’re keeping our TFSA for investing and for our next downpayment, so this is just a regular savings account.

  4. I don’t have an irregular spending account though maybe I should, it sounds like a great idea and then I won’t feel guilty everytime an unexpected expense comes up and there’s nothing extra in my budget for it.

    • CF says:

      Yeah I hate feeling guilty about buying things for myself. I like having the account because I can see exactly how much I have and if I want to spend it, there’s no thinking involved.

  5. I’ve considered keeping a savings account for those random expenses that pop up – and they always do – at inconvenient times. But I’ve never opened one. I maybe should. I usually just put it on my credit card and pay it back by the time it’s due so I don’t accrue interest.

    • CF says:

      I find I lose track of where things are “supposed” to go and where they are coming from when I put it on my credit card, unfortunately. Not organized enough!

  6. We just pay for lots of things out of cash flow and know when big things are coming up. In my experience, most people are more than happy to have you come participate in an event but not provide a gift – just write a really nice, heartfelt card! My site also has a list of nearly-free, thoughtful gift ideas you can give, even when you’re broke. 🙂

  7. We are two peas in a pod. My hubby and I do the same thing. We have an account we use for irregular expenses to that covers things like car insurance, special occasions, etc. It works out great and we have been able to stick to our budget a lot better.

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