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Stop Denying, Start Saving to Cope with Infrequent Expenses

Many people live in a state of denial about the cost of infrequent expenses.

For example, it's reasonable to expect that a car eventually will need new tires, a tooth will require a filling, or a household appliance will need to be repaired or replaced.

A savings plan

All these expenses can be budget busters unless you save in advance.

To create a savings plan for infrequent expenses, take a tour of your home. Figure out when you probably will need to replace appliances and mechanical systems by visiting the This Old House Web site (thisoldhouse.com) and searching for "How Long Stuff Lasts."

If you own a car, save for repairs based on vehicle mileage, budgeting $25 a month for a new car; $50 a month for a vehicle with 30,000 to 60,000 miles; $75 a month for 60,000 to 100,000 miles; and $100 a month if the odometer tops 100,000.

If you're a homeowner set aside at least 2% of your property's value for repairs and maintenance each year. You also should budget for personal expenses that aren't covered by insurance, such as dental cleanings or eye check-ups.

Break it down

To figure out how much to save each month, create a grid. List infrequent expenses on the left side and make columns for annual and monthly budget amounts across the top. Figure out the total cost for each infrequent expense, and then break it down by years and months as needed. Tally your columns to get an annual or monthly total.

Over time, higher-than-expected expenses for one item on the list are likely to be balanced by below-budget expenses in another. Keep that in mind to avoid the temptation to pull money out of savings to spend on unrelated items. That way, you'll be prepared whenever an infrequent expense becomes an immediate necessity.

Copyright 2008 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.