Big expenses are just a part of life and something that you have to deal with. Eventually you’ll need to buy a new car, once a year you have to pay taxes on your vehicle and that vacation you keep dreaming of to take next summer ain’t free. As I hope most of you are already on, sometimes a budget can make saving and setting aside money for big purchases tricky. When that time comes to make that big purchase, it can be quite stressful if you’re not prepared. Let’s make big expenses less stressful:
- Plan ahead. From time to time it is important to sit down and think about the months ahead. Are there going to be any large purchases coming up in the next 3-6 months? Perhaps you’re like me and a new year brings a new renters insurance policy that I pay in full. December is for a lot of us quite an expensive month too, so many gifts, parties and travel expenses coming our way. By figuring out what’s coming ahead, we can appropriately make arrangements so our budgets don’t take a shocking hit.
- Decide how much you need and how much you can afford to put aside each month. In step one we identified a large expense that is coming out way in the next few months. Do some math here and figure out how much time you have before you need the money and then how much you need to save each month to be able to reach that goal. $25 over the next three months? $100 in November and December?
- Set some money aside. Depending on the style of your budget, this could take one of many routes. Most budgeting software out there (including Excel) will allow you to allocate some of your monthly income that you don’t spend elsewhere into an ‘area’ of your budget in which you’re saving up for the big expense in the coming months. The idea is that you’ll spend less money in some areas (perhaps going out) and set aside that money to be used for the big future expense. Alternatively if that is a) confusing or b) too easy to spend before you actually need it, the envelope system works great. Go to your local ATM and get out some cold, hard cash (for all you youngsters that don’t know what cash is, it’s similar to a credit card but is made of paper). Keep that money in the envelope clearly marked with the large expense written on it to help keep you focused.
- Make it happen, captain, or deal with the stress of not being prepared!
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