August 21, 2008

Other Liabilities Detail

On my most recent Net Worth post, I reported $6,080 of "other liabilities". These balances mainly consist of accruals for large expenses throughout the year. The accruals are tracked to avoid significant swings during the year for vacations, heating oil bills and real estate taxes. Let's explore these in more detail -

Real Estate Taxes ($1,012)
We do not escrow our real estate taxes since we can obtain a better interest rate keeping it in our own savings. Our annual tax bill is $12,144 (I know, it is painful to see the number. For those who live in other parts of the country, the Northeast is out of control when it comes to real estate taxes). I accrue $1,012 monthly and pay the bill twice a year (January and July).

Vacation ($1,553)
We estimate our annual vacation cost to be $3,000 and therefore accrue $250 / month. The balance is usually drawn down during the summer.

Heating Oil ($757)
This estimate will change annually depending on where heating oil prices are. My estimate for this year is $4 / gallon. We use about 1,200 gallons a year which brings our total expense to $4,800 or $400 per month.

Christmas ($700)
We estimate Christmas expenses at $1,200 or $100 / month. The balance is cleared in December.

Allowances ($2,058)
I will dedicate an entire post to this topic in the future. This balance is for Mr. and Mrs. MMPF monthly allowances that can be spent on anything. Currently $200 / month for each of us.

There's the detail. These balances will fluctuate monthly based on additional accruals and payments from the accounts. I like using these accounts throughout the year to track large expenses, rather then taking big hits in the month the bills are due.