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An Alternative to Escrow

I wrote the other day about if you should or shouldn't escrow. If you choose not to, here's a method my wife and I have been using for a few years to help ensure those annual or semi-annual bills don't break the bank...or ruin Christmas.

1. Calculate your annual or irregular expenses - house tax & insurance, car tax & insurance, life insurance, etc.
House Tax = $900
House Ins = $720
Car Tax = $300
Car Ins = $900
Life Ins = $1,000
Total = $3,820

2. Divide that total by 12 = $320 (rounded). I also like to keep this on a spreadsheet so I can update it every year or so.

3. Set up a separate interest bearing savings account for your "escrow." Note: this should NOT be the same as your regular savings account since this money is already allocated for a special purpose. Plus, instead of the bank earning interest of your money, you do!

4. Now comes the hard part, being disciplined enough to put that amount into the escrow savings account each month/pay period.

Hope this is helpful with your family's budgeting this summer.
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