Planned cost funds: how to plan for costs that don’t happen every month

Some costs aren’t planned for in your monthly budget. But when they do, they can put pressure on other parts of your finances.

It could be your MOT, a birthday gift, new school uniforms, or Christmas. You might know it’s coming, but that doesn’t always make finding the money any easier.

Planning ahead won’t make the cost disappear. But putting aside a small amount when you can could make it feel more manageable when the time comes.

What are occasional costs?

Occasional costs are things you don’t pay for every month but know are likely to come up.

They might include:

• School uniforms, trips or activities
• Visits to family
• Pet check-ups, vaccinations or insurance

Some people call this a “planned-cost pot”. That can sound complicated, but it’s simply a savings pot for a cost you’re expecting.

For example, you could have a small pot for Christmas, another for car costs and another for school expenses. It’s important to save however it works for you.

Is a planned-cost pot different from an emergency fund?

Yes. The main difference is whether you expect the cost.

A planned-cost pot is for something you know, or strongly suspect, is coming. An emergency fund is for something unexpected, urgent and essential.

Both can help you feel more prepared. But you don’t have to build them all at once. Start with the cost that feels most important to you right now.

For help starting your emergency fund, read our guide here.

How do I plan for costs that don’t happen every month?

You don’t need a perfect plan. Start with what feels realistic for your budget.

Make a list

Write down the costs you expect over the next 12 months. Think about last year if you’re not sure where to start.

Try to include the bigger things you know about, such as an MOT, Christmas or a school trip. You can also include smaller costs that tend to add up, like birthdays or annual subscriptions.

Don’t worry if you can’t remember everything. You can add to the list as you go.

Choose one or two priorities

You don’t need to save for every occasional cost at once. That could feel overwhelming.

Choose one or two costs that are coming up soon, or that would cause the biggest problem if you had to pay for them all at once. You might decide to focus on car costs first or put aside a little for Christmas.

It’s okay to change your priorities as the year goes on.

Work out a rough amount

Next, estimate how much each cost could be. It doesn’t have to be exact.

If your car insurance was £360 last year, you could use that as a guide for this year, although it’s always best to shop around. If you’re saving for Christmas, think about what you spent last time and whether you want to spend the same, less or more.

A rough figure is enough to help you make a start.

Break it into smaller amounts

Once you know the cost and when it’s due, divide the amount by the number of months you have left.

For example, if you want to put aside £240 for Christmas and have eight months to save, that works out at £30 a month.

If £30 doesn’t fit into your budget, don’t give up. You could save £10 or £15 instead, start earlier next year or change your plans to keep the cost lower. Saving something is still useful.

Keep it somewhere separate if you can

A separate savings account or savings pot can help you see what the money is for. It may also make it easier not to use it for day-to-day spending.

If you don’t have a separate account, you could keep a note of how much of your savings is set aside for each cost. The important thing is knowing what the money is there for.

What if I’m not in a plan?

You don’t need to be in a debt plan to plan for occasional costs. This can help whether you’re paying off debt, managing money on your own or simply trying to stay ahead of the next big expense.

Your essential bills and everyday costs should always come first. Don’t put money aside if it means you’ll have to miss rent, energy bills, food or other essentials.

If you’ve got room in your budget, even a small amount a week can be a good place to start. It’s about building a habit that works for you, not trying to save an amount you can’t afford.

What if money’s tight?

When money’s tight, it can feel impossible to save. That’s understandable.

Start by looking at your regular income and spending. You might find a small amount you can put aside, even if it’s not every month. A refund, gift or a little money left over at the end of the month could all help top up your planned-cost pot.

BudgetSmart can help you review your spending and look for ways to make your money go further. You can also read our guide on how to write a budget that works.

If you’re worried about debt or finding it hard to cover essential bills, get in touch with us online or by phone at 0800 316 1833.