What Home Sellers Can Legally Hide and How to Master Irregular Bills
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This episode of NerdWallet's Smart Money podcast tackles the challenge of budgeting for irregular expenses - those annual, quarterly, or unpredictable bills that can derail your financial plans. The episode begins with a fun Halloween-themed discussion about haunted houses and disclosure laws for supernatural activity or tragic events in homes. (26:58) The main segment addresses a listener named Alyssa who earns $180,000-$200,000 annually but struggles with irregular expenses like annual oil bills, fluctuating utility costs, and unpredictable charges eating into their savings.
- Core focus: Creating systems to smooth out irregular expenses and prevent them from disrupting savings goals and monthly budgets
Speakers
Sean Piles
Sean Piles is the host of NerdWallet's Smart Money podcast and a personal finance expert. He demonstrates sophisticated budgeting techniques by maintaining nine separate savings accounts for different financial goals, including wedding planning, house maintenance, and taxes, showing his commitment to organized financial planning.
Elizabeth Ayoola
Elizabeth Ayoola is a co-host of NerdWallet's Smart Money podcast and personal finance writer. As a single mother, she brings practical insights about managing irregular childcare expenses and has experience running a small business, giving her unique perspectives on both personal and business financial planning.
Holden Lewis & Kate Wood
Holden Lewis and Kate Wood are NerdWallet's housing experts who contribute to the podcast's real estate discussions. Kate Wood lived in a colonial house dating to 1744 and has extensive experience with historic home ownership, while Holden Lewis brings expertise in real estate disclosure laws and market dynamics.
Key Takeaways
Track Your Irregular Expenses to Discover Hidden Spending Patterns
The hosts discovered they were spending much more on irregular expenses than expected - Sean spent over $3,500 annually while Elizabeth spent around $5,000. (18:47) These expenses include pet insurance, credit card annual fees, car registration, magazine subscriptions, and childcare costs. The revelation demonstrates how irregular expenses can significantly impact your budget without you realizing it. By tracking these expenses for several months and creating a spreadsheet with dates, you can anticipate when bills will arrive and avoid the stress of scrambling to cover unexpected charges.
Use the "Pay Yourself First" Method for Irregular Expense Planning
Sean advocates for setting up multiple savings accounts with automated transfers from each paycheck to cover specific irregular expenses. (29:37) This approach involves calculating annual irregular expenses, dividing by 12, and automatically saving that amount monthly. For example, if you have a $2,000 annual oil bill, you'd save approximately $167 monthly in a dedicated account. This method ensures the money is set aside before you can spend it on other things, creating a "set it and forget it" system that prevents irregular expenses from derailing your budget.
Address Lifestyle Creep to Free Up Money for Irregular Expenses
Elizabeth shared how tracking expenses revealed unconscious overspending on services like Uber Eats and impulsive "yes" responses to social invitations. (28:08) For couples earning $180,000-$200,000 who feel financially tight, lifestyle creep is often the culprit. The solution involves tracking every expense for one month to identify spending patterns, then making conscious decisions about where to cut back. This process can be "freeing" because it removes the stress of not knowing where your money goes and provides a clear path forward for better financial management.
Implement the 50/30/20 Budget Framework for Sustainable Money Management
For people who want a "set it and forget it" approach to budgeting, the 50/30/20 framework provides structure without micromanagement. (25:51) This method allocates 50% of income to needs, 30% to wants, and 20% to savings and debt payments. If your irregular expenses fit neatly into these categories, you can maintain financial balance without tracking every purchase. This framework is particularly effective for middle-class earners who have enough income to be comfortable but need better structure to achieve their savings goals.
Create Buffer Zones for Fluctuating Irregular Expenses
For expenses that vary in amount like quarterly water bills or seasonal heating costs, calculate an average based on the last 3-4 bills and add a cushion for price increases. (21:31) This prevents underestimating irregular expenses and ensures you have enough saved when bills arrive. The cushion strategy is particularly important during times of inflation or when utility companies announce rate increases, helping you avoid dipping into other savings goals to cover higher-than-expected bills.
Statistics & Facts
- Sean spends over $3,500 annually on irregular expenses, with $2,200 coming from pet insurance alone. (18:47) This statistic illustrates how pet ownership can create significant irregular expenses that many people don't account for in their budgets.
- Elizabeth spends approximately $5,000 annually on irregular expenses, including credit card annual fees and childcare costs. (18:59) This demonstrates how irregular expenses can represent a substantial portion of someone's budget, especially for single parents.
- Alyssa and her spouse earn between $180,000-$200,000 per year but struggle with feeling financially tight due to irregular expenses. (16:45) This shows that even high earners can face cash flow challenges when irregular expenses aren't properly planned for.
