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Managing April Budget Crunch

April 6th, 2009 at 07:24 pm

April is always a taxing month for us, budget-wise (pun intended, hehe). Our CA property taxes are due, we usually have some additional state or federal income taxes to pay, along with a hefty fee to our accountant, and our annual auto and house homeowner's premiums are due in April. Although no one is happy about paying taxes, at least I don't stress about it because we are ready for these extra expenses.

Each month I set aside a predetermined amount that is deposited in a "reserve" account where the funds earn interest until they are withdrawn. At 1.5%, these funds earn ~$300 in the course of the year. Whenever possible, I put expenses on my rewards credit card first, then pay off the balance when it's due with reserve account funds, further leveraging funds to earn interest a little longer and provide miles used for travel savings.

Some folks let the bank impound tax and insurance payments, but I prefer to earn the interest in exchange for the responsibility of managing it myself. The reserve fund pays bills that are due several times during the year (e.g., taxes, auto/HO insurance, HOA dues, timeshare dues, accountant, etc.). However, it's critical to stay on top of due dates to avoid late penalties.

1 Responses to “Managing April Budget Crunch”

  1. Ima saver Says:

    I do the very same thing. I put aside $175 a week to pay the car insurances (six), house insurance and property tax. I put it in a checking account paying 3.1% interest, so i earn a little money also.

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