Creating a budget can feel manageable when you're working with regular, recurring expenses like rent, utilities, and groceries. But what about those costs that pop up only once or a few times a year? Non-recurring expenses—things like annual insurance premiums, car repairs, or holiday shopping—can throw off even the most well-planned budget if you’re not prepared.
Planning for these irregular expenses is key to financial stability and can help you avoid debt or overspending when they arise.
In this article, we'll break down what non-recurring expenses are, provide examples, and guide you through a simple five-step process to budget for these unexpected costs, with help from budgeting experts.
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What are non-recurring expenses?
Non-recurring expenses are costs that don’t occur on a regular monthly basis but still need to be accounted for in your annual financial plan. They’re often larger, less frequent costs that can vary in both timing and amount.
“They're the financial curveballs life throws our way, often catching us off guard,” says Steven Kibbel, a certified financial planner and Chief Editorial Advisor at Gold IRA Companies. “These expenses can range from unexpected car repairs to sudden medical bills or even once-in-a-lifetime opportunities like a dream vacation.”
Unlike costs that are recurring, non-recurring expenses can sneak up on you if you aren’t actively budgeting for them. These costs might not always be avoidable, but they can often be predicted—especially if you take the time to plan for the year ahead.
Non-monthly expenses examples:
- Car repairs and maintenance: While regular fuel costs are part of your monthly budget, significant car repairs like brake replacement or new tires might happen once or twice a year.
- Medical bills: Even with health insurance, unexpected medical expenses such as emergency visits or out-of-pocket costs for surgeries can arise at any time.
- Vacation and holiday spending: Many people forget to include vacation expenses in their budget, leading to overspending (and potentially credit card debt) during the holidays or when traveling.
- Annual subscriptions and memberships: These include costs like insurance premiums, magazine subscriptions, or professional association fees.
- Home maintenance: From new roofing to plumbing repairs, home maintenance costs can vary but should be planned for each year.
Put simply, the main difference between recurring and non recurring expenses is that the first one occurs on a regular basis, while a non-recurring expense is a one-time or infrequent purchase.
By identifying these expenses in advance, you can avoid financial surprises when they occur and you will be able to know how to budget for expenses that are not monthly.
How to budget for non-recurring expenses
Budgeting for non-recurring expenses may feel overwhelming—but it doesn’t have to be difficult.
So, how to budget for irregular expenses? Break down the process into manageable steps, so you're able to anticipate and prepare for them—turning what feels unpredictable into something you’ve got covered.
1. List your non-recurring expenses
Identify and list all potential non-recurring expenses you expect over the next year. Review your spending history from the previous year, looking at bank statements and credit card transactions for costs that didn’t occur monthly but still needed to be covered. This could be anything from insurance premiums to appliance repairs.
“Also, think about what upcoming expenses you have,” says Loretta Kilday, a Debt Consolidation Care spokesperson with over 30 years of experience in personal finance. “For example, if you have a tentative vacation plan in place, consider those costs. If some of your appliances are reaching the end of their life cycle, you may start thinking about replacing them soon.”
2. Estimate the cost of each expense
Once you’ve identified your non-recurring expenses, estimate how much each one will cost. For some items, like an annual membership fee, the cost is fixed, making this step simple. For others, such as car repairs, you’ll need to estimate based on previous years’ expenses or research average costs.
“Assign approximate amounts to each of these points based on your research or past experience,” Kilday says. “For example, if you spent around $1000 servicing your car last time, you can use that as an approximate cost for the same in the future.”
3. Divide the total by 12
After estimating the total cost of all non-recurring expenses, divide the sum by 12 to find out how much you should set aside each month. This technique allows you to treat non-recurring expenses like any other recurring monthly bill, spreading the financial burden evenly throughout the year.
For example: If you estimate $2,400 in non-recurring expenses over the year, you should set aside $200 per month ($2,400 ÷ 12 = $200). This way, when the time comes to pay those expenses, you’ll already have the funds saved.
4. Create a dedicated savings account
Set up a separate savings account to save the money for non-recurring expenses. “Avoid using this account for any of the regular expenses or your other savings—like another savings account for retirement,” Kilday says. Transfer your monthly contributions into this account, so when the time comes to pay for a non-recurring expense, the money is readily available.
Many banks allow you to set up multiple savings accounts, so you can easily create one specifically for non-recurring expenses. You can even nickname the account to remind yourself of its purpose, such as “Car repairs & annual fees.”
5. Review and adjust regularly
Review your budget periodically to ensure you’re on track. Non-recurring expenses can fluctuate, so keep an eye on your spending patterns. If an unexpected expense comes up that wasn’t planned, adjust your budget accordingly to avoid dipping into savings or using credit cards.
Likewise, you might discover that some predicted expenses (e.g., a home repair) didn’t happen as expected. In that case, reallocate those funds toward another goal or future expenses.
“Life changes, and so do our financial needs,” Kibbel says. “Maybe you've moved to an older home that might require more maintenance, or perhaps you're planning a big family event. By regularly reassessing your budget, you can make sure you're prepared for whatever comes your way.”
Why budgeting for non-recurring expenses matters
Failing to plan for non-recurring expenses can lead to financial stress, especially if you rely on credit cards or loans to cover these costs when they arise.
“As a financial planner, I've seen how these unpredictable costs can derail even the most carefully planned budgets if we're not prepared,” Kibble says.
By including them in your budget, you’ll maintain better control of your finances and avoid scrambling for money when the bills come due.
“Not all unexpected costs are created equal,” he says. “Some, like essential home repairs or medical treatments, should take precedence over others. By prioritizing these expenses, you can ensure that you're using your funds wisely and addressing the most critical needs first.”
Budgeting for non-recurring expenses might seem challenging at first, but by following these steps, you can smoothly integrate them into your overall financial plan.
“Predicting every single non-recurring expense perfectly is simply not possible, so the aim is to build financial resilience,” he says. “By consistently setting aside money and staying mindful of potential future expenses, you'll be better equipped to handle whatever financial surprises come your way.”