You likely have expenses that are less frequent than monthly, property taxes get paid twice a year, and your homeowners' insurance maybe only once, but those expenses are predictable nonetheless.
Irregular expenses happen pretty regularly on the business side as well, but today we are focusing on your personal finances.
Personal irregular expenses include things like family vacations, home or car repairs, gifts, and donations. While you may have budgeted amounts and done a bit of planning, they are all less well defined in advance and thus a different matter altogether.
Those irregular expenses not only have variable amounts, but also variable dates when they are due and the frequencies as to when they occur. As such they are much more difficult to plan precisely for.
Just because they are more difficult to plan for doesn’t mean you should bury your head in the sand and not put any kind of plan in place. You still want to be prepared for when these kinds of expenses do come along.
Those are the perfect expenses to have a plan and a budget for and be putting aside money regularly in order to cover when they do creep up. Especially the known ones like vacations. Perhaps you do one big vacation per year, or maybe you do a medium one every year and a bigger one every 2 or 3 years. Whatever your family does and wants to do needs to have a plan in advance so you know that your cash flow is going to be able to support it.
Cash flow can be a challenge when dealing with irregular expenses, and that is where the reserve concept comes into play.