How to plan your expenses for the next 12 months

In a nutshell

Many months "blow up" because of expenses that happen once a year and that everyone knew were coming: vehicle tax, property tax, school enrolment, school supplies, car insurance, holiday presents. Planning 12 months means listing these expenses, knowing which month each one falls in and setting a little aside every month for them. That way the heavy month stops being a shock. This guide uses Brazilian examples and amounts in reais (R$).

What goes into the year plan

Besides your monthly bills, look for expenses that come once or a few times a year:

• taxes and fees: IPVA (Brazil's vehicle tax), vehicle licensing, IPTU (municipal property tax);
• school: enrolment, supplies, uniform;
• insurance and annual fees: car or home insurance, the credit card annual fee;
• dates: birthdays, Children's Day, Christmas, holiday trips;
• maintenance: car servicing, appliance repairs.

The dates and amounts of IPVA and IPTU depend on the state and the city, and you can often choose between paying in full or in instalments. Check your state's and city's calendar.

On the income side, write down what does not arrive every month. In Brazil, formal employees receive a 13th salary: by law, the first installment, worth half a month's salary, must be paid between February and November, and the rest by 20 December. Holiday pay and income tax refunds count too, but only once the date and amount are confirmed.

Example

Rita and Paulo's family listed their yearly expenses:

• IPVA and licensing, in January: R$ 1,800
• school supplies, in January: R$ 900
• IPTU, in February: R$ 1,200
• car insurance, in August: R$ 2,400
• holiday presents, in December: R$ 1,200

Total for the year: R$ 1,800 + R$ 900 + R$ 1,200 + R$ 2,400 + R$ 1,200 = R$ 7,500.

Divided by 12: R$ 7,500 ÷ 12 = R$ 625 a month. If the family sets aside R$ 625 every month in an account just for this, they will have saved R$ 7,500 in 12 months, the total of these expenses.

The catch is the start. If they start saving in March, there will be 10 deposits by the end of December. The next January's expenses (R$ 1,800 + R$ 900 = R$ 2,700) need R$ 2,700 ÷ 10 = R$ 270 a month on their own. That is why it pays to build a month-by-month calendar and check that the savings arrive before each bill. When they do not, there are three ways out: save more in the first months, pay the tax in instalments when that costs nothing extra, or rethink an item on the list.

Step by step

1. Take your bank and card statements for the last 12 months and mark the expenses that do not happen every month.
2. Make a list with the amount and month of each one. If you do not know the amount, use last year's with some margin.
3. Add everything up and divide by 12 to get the monthly amount to set aside.
4. Build the calendar: month by month, how much will be saved and how much goes out. Adjust if any month turns negative.
5. Keep this money in an account or "pot" separate from your everyday account, so you do not spend it by mistake.
6. Review the plan every three months and whenever an amount changes.
7. In Meu Gasto, add each yearly expense as a bill with its due date to get a reminder. In Planning, record expected income and each month's limits and copy them to the following months.

Common mistakes

• Remembering the vehicle tax only in January. Known yearly expenses should go into the plan months ahead.
• Counting on the 13th salary before it is paid. Plan with the legal or company date, and do not spend it before you receive it.
• Keeping the year's money with the month's money. In the same account, it ends up spent on everyday purchases.
• Making the plan once and forgetting it. Prices, school and insurance change. Review often.
• Using the credit card to "fix" the heavy month. Putting the tax on the card without a plan just pushes the problem into the next months.