Starting a Bills Fund Halfway Through the Year: How to Catch Up

Every money guide says the same thing: start saving for annual bills at the beginning of the year. Which is great advice if it's January. It's less helpful when it's November and the car insurance renews in eight weeks.

A sinking fund still works when you start late. It just costs a bit more per pay at first. Here's how to catch up on bills that are already close, without pretending you can fund everything at once.

What a sinking fund is (and why starting late is normal)

A sinking fund is money set aside in small, regular amounts for a cost you know is coming. Think car rego, insurance renewals, school fees, memberships, the annual subscription that always catches you out.

Instead of finding $520 in one go, you put away a smaller amount each pay so the money's sitting there when the bill arrives.

Most people don't start one until a bill has already surprised them. That's fine. The first year is the catch-up year, and it's the only one that feels expensive.

Step 1: List every annual and quarterly bill

Go through the last 12 months of your bank statements and pull out anything that doesn't come monthly. For each one, write down:

• What it is
• The amount (use last year's figure if you don't have this year's yet, and round up a little for price rises)
• The next due date
• Anything you've already saved toward it

Common ones people forget: car and home insurance, rego, professional memberships, annual software or streaming plans, school costs, council rates, pet registration and the dentist.

Step 2: Calculate a catch-up amount for each approaching bill

For each bill, the catch-up formula is:

(Bill amount minus what's saved) divided by pays before the due date

Here's an illustration with a fictional bill:

• Annual bill: $520
• Already saved: $120
• Still needed: $400
• Fortnightly pays before the due date: 4
• Catch-up amount: $100 per pay

Do this separately for each bill. Bills due soonest will have the highest catch-up amounts, because there are fewer pays to spread them across.

If you want a deeper example of a single deadline, our guide to what to do when rego is due in six weeks walks through one bill step by step.

Step 3: Check the combined total against your income

Now add up all the catch-up amounts for bills that overlap. This is the honest moment. If you've got three bills coming in the next two months, the combined figure might be more than your budget can carry.

Test it the same way you'd test any regular cost. After rent or mortgage, groceries, transport, utilities and existing repayments, is the total catch-up amount left over?

If it fits, set up automatic transfers on payday into a separate account and give it a clear name, like "Bills fund".

If the total doesn't fit, prioritise

It's common for the first year's numbers not to add up. That doesn't mean the plan has failed. It means you need to choose an order.

• Start with the nearest and most important. Housing, energy, insurance and rego tend to have the biggest consequences if they're missed.
• Ask about payment options early. Some insurers and councils offer instalments. Check the total cost of paying that way, because instalments can cost more.
• Pause or trim flexible costs for a few months. A short-term squeeze while you catch up is easier than a permanent one.
• Get support if several bills are competing. A free financial counsellor through the National Debt Helpline (1800 007 007) can help you work out what to tackle first.

No guide can promise every bill will be fully funded on time in the first year. The aim is to make each one less of a shock than it would have been.

Step 4: Switch to an ongoing amount after each bill is paid

Here's the good news. Once a bill has been paid, its contribution drops sharply, because next time you've got a full year to save.

The ongoing formula is simply:

Yearly bill amount divided by pays in a year

Using the same $520 bill and 26 fortnightly pays, that's $20 per pay, down from $100. If the bill stays the same next year, $20 a fortnight covers it.

As each bill gets paid, its catch-up amount falls to its ongoing amount. Over 12 months, your total contribution steadily shrinks until every bill is on the smaller, steady figure. That's when a sinking fund starts to feel easy.

A quick tip: when a renewal notice arrives with a new price, update the ongoing amount straight away.

Making it stick

• Automate it. A transfer set up for the day after payday works better than good intentions.
• Keep it separate. A dedicated account makes it obvious the money has a job.
• Check in quarterly. Make sure amounts and due dates are still right.
• Plan the Christmas squeeze. If December is tight, our guide to saving for Christmas starting in October shows how to fit it in alongside your bills.

If you're paid fortnightly but your bills are monthly, our guide to making fortnightly pay and monthly bills line up covers the maths for regular bills too. And Beforepay's free Budgeting & Insights flags upcoming bills once you connect your bank account, which helps you spot the annual ones before they land.

Your three-column worksheet

Draw three columns on a page, or set them up in a spreadsheet:

1. Bill and due date
2. Catch-up amount per pay (amount still needed, divided by pays left)
3. Ongoing amount per pay (yearly amount, divided by pays per year)

Add up column 2 to see what this year costs. Add up column 3 to see what every year after that costs. The gap between them is the reward for getting through year one.

This article is general information only. It does not take your personal circumstances into account and it is not financial, tax or legal advice.