Setting up "Escrow" savings for irregular bills

One of the challenges of budgeting your monthly income is bills that are not due monthly. Examples include taxes, insurance, homeowners dues, and many more. My solution is to break the amount of the bill up as if it were due each month and have automatic transfer so a dedicated "bills escrow" savings account. I will use my own example:

I have two "irregular bills" that I must pay:

  1. Homeowners Association dues: $150 due every 6 months
  2. Water/Sewage: $60 average, billed every 2 months
If you do the math #1 is $300 a year. That works out to be $25 per month. For #2 it works out to be $30 per month on average. I have set up an automatic transfer of $55 per month to go to my "bills escrow" savings account. When they come due I will have the money waiting for it (and earning some interest!).

When the time comes I will transfer the appropriate amount back to my checking and pay it on the due due. At the end of the year I will re-evaluate the escrow system and make any adjustments up or down as needed. Using this system prevents you from having to dip into savings or have hardship when the "irregular bill" comes. It makes balancing your finances much easier!