Build a twelve-month calendar of irregular costs and add its monthly sinking fund total to your budget.
Wei Ling sits down in March (an invented example, like all her figures here) to turn her irregular costs into a single monthly amount, and she makes her first transfer that month. Her aim is one payday transfer out of her salary account that covers every one of those costs, so none of them leaves her short later in the year.
You need two things from earlier: the irregular cost list from lessons 3.1 and 3.3, and the monthly amount method from lesson 3.2. Set aside about 30 minutes. The calendar is a one-off job to build, and from then on your only task is keeping it current.
In the spreadsheet where your budget already lives, add a new tab. Label 5 columns across the top: cost, expected amount, month due, months until due and monthly amount. Go down your list and complete the cost, expected amount and month due for each item.
For the expected amount, look up what you paid the last time and round it up a little if prices have risen since. A few costs come up only once every few years, a phone being the usual one. For these, write the month you expect to replace it in the month due column.
Months until due counts the transfers you will really make before a cost has to be paid. The month the bill arrives is left out of the count. Wei Ling starts in March, so her July cost has 4 transfers behind it: March, April, May and June.
Each row's monthly amount is its expected amount divided by its months until due. Type one formula that divides the amount column by the months column, and the spreadsheet fills in every row for you.
Her seven costs work out like this:
Dental check-up in July: S$160, 4 months, S$40 a month Wedding gifts and outfit in September: S$300, 6 months, S$50 a month Penang trip in November: S$900, 8 months, S$112.50 a month Christmas and December birthdays in December: S$360, 9 months, S$40 a month Lunar New Year next February: S$880, 11 months, S$80 a month Cloud storage renewal next March: S$48, 12 months, S$4 a month Phone replacement in 24 months: S$1,080, 24 months, S$45 a month
Sum the monthly amount column and you have your sinking fund line, a single budget line that pays for everything on the calendar. Wei Ling's sum is 40 + 50 + 112.50 + 40 + 80 + 4 + 45 = S$371.50 a month.
Next, compare that figure with your budget. Your future you allocation has other work to do as well, paying down debt (module 5) and building your buffer (module 6), so the sinking fund total has to leave space for both. In the budget Wei Ling made in lesson 2.5, future you gets S$630. If S$371.50 of that went to sinking funds each month, what remained would be too little for debt and buffer.
When the total is too big, put your costs in order of how much each one matters and start cutting at the bottom of the list. Any low-ranked cost can be made smaller, moved further into the future, or dropped altogether.
Wei Ling ranks hers. Lunar New Year, the dental check-up and the phone sit at the top, since going without them isn't a real choice for her. The wedding and the December presents sit in the middle, and the Penang trip and cloud storage sit at the bottom. For Penang she picks a cheaper hotel and weekday flights, which takes the trip from S$900 to S$600, so S$75 a month (S$600 / 8). She hardly touches her cloud storage, so she cancels it, shifts her photos to a free plan and saves S$4 a month. Her total falls to S$330 a month, and S$300 of her S$630 is left for debt and buffer, which is less room than she wanted.
She learns this in March, with months still ahead to make changes. Discovering a tight budget that early gives you time to adjust, while finding out in November leaves you far fewer choices.
In next month's budget, create a line called "sinking funds" and enter the total from your calendar. The money for it comes out of your future you allocation, or out of wants if your festive or travel spending used to sit there without its own line. Wei Ling's budget now reads needs S$2,160, wants S$1,010, sinking funds S$330 and future you S$300, a total of S$3,800 as before.
Then arrange a standing instruction or recurring transfer at your bank that moves the full total from your salary account to your sinking fund account on payday. Payday is the best date because the money is gone from your salary account before you get the chance to spend it.
Each time you pay one of the costs, go back to its row and change it. Its next round is usually twelve months off, so the monthly amount gets smaller. Once Wei Ling has paid for her dental check-up in July, that row needs only about S$13 a month (S$160 over 12 months).
Look over the calendar at every monthly close, the routine set out in module 7. If the total has shifted by more than a few dollars, adjust the transfer to the new figure.
The finished calendar is a single tab that lists each irregular cost with its due month and monthly amount, a total that sits in your budget as its own line, and a payday transfer that happens without any effort from you.
Start by copying your list into the five columns.
Build the calendar, put the sinking fund total in next month's budget as its own line, and set up the payday transfer.
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