Once you reach your 30s, simply saving a portion of your paycheck doesn’t cut it when it comes to handling money responsibly. As you transition out of the carefree days of your 20s and start making major life changes — whether it’s getting married, buying a house, or having kids — it’s crucial to take a big-picture look at your finances. We asked a financial planner to explain what we should all be doing.
The best money habit 30-somethings can develop is taking time at the end of each year to create an annual budget instead of living month-to-month. Sophia Bera, CFP and founder of Gen Y Planning, explains:
“When we budget monthly, we have a hard time forecasting that we’re actually going to need extra money throughout the year to pay for irregular expenses, even if it’s things like your car insurance premiums. When we look at our budget on a yearly basis, we’re much more mindful of ‘Oh yeah, I pay my life insurance premiums yearly’ or ‘We take a family vacation every year and it’s X amount of dollars.'”
Whether it’s medical expenses, home repairs, or a friend’s wedding, irregular expenses tend to come up every month. When you reflect on your budget for the entire year at once, it’s much easier to put these costs into perspective, allowing you to plan ahead instead of weathering them as they come.
“I encourage you to take a look and say, ‘If I were to budget yearly, about how much money would I need for these different things?'” Bera suggests.
Sit down with your credit card bills and bank statements and track how much you spend across each category annually, including rent, food, and all of those one-time irregular expenses. Seeing how much you put toward each over the course of a year will allow you to break down your monthly budget more effectively, especially when it comes to planning for things like vet bills, birthday gifts, or weekends away.
“That’s going to make you really prepare for 2017 and figure out how much you put into these different accounts per month,” Bera said. “You want to have that money there when you take that next family vacation, but it’s still part of the yearly budget.”
Despite not knowing exactly where you’ll end up spending the money, factoring irregular expenses into your budget from the start means they won’t catch you off guard or drain your emergency fund.
This story originally appeared on Business Insider.