If you’ve ever felt overwhelmed by the thought of budgeting for a big expense, this blog post is for you! Today, we’re teaching you how to save for big expenses.
Kate Miller, a certified financial coach and Georgia native, is back to share her best budgeting tips and tricks.
Keep reading to learn:
- the types of expenses you should save for,
- what mindset you should have when it comes to saving,
- how to create a savings plan,
- savings tools,
- and more
What Big Expenses Should You Save For?
Big expenses don’t just include a new car, roof, or HVAC unit. They also include vacations and even your kids’ college education.
Kate noted you should also consider items that need to be replaced, such as appliances that will eventually wear out and your vehicle’s tires.
“There are also annual expenses that you should save up for, including summer camps for your kids and that beach vacation,” she said.
And remember: not all savings goals are “one and done;” some will be repeated for years to come.
“When you make savings an expected and normal part of your budget in the same way you do your power bill, you’ll find that, over time, your financial anxiety will lower significantly,” Kate said.
Most importantly, saving ahead for big expenses helps you avoid debt.
Tips for Identifying Big Expenses
Kate suggests asking yourself these questions when identifying future big expenses:
- What appliances will likely need to be replaced within the next few years?
- What big expenses will my family members incur? (For example, will your children need braces?)
- What big expenses have we had in the past? Could they occur again?
- What big expenses have my family members incurred? Am I likely to have the same expenses? If so, am I prepared?
“It’s important to remember that saving for large expenses is not the same as saving for a standing emergency fund or for retirement,” Kate said. “Those are both important goals as well, but require different approaches compared to saving for a new deck or a replacement HVAC unit.”
The Budgeting Mindset
It might sound strange, but consider saving … fun!
“It’s important to approach savings with an attitude of excitement and gratitude versus a feeling of overwhelm,” Kate said.
In fact, Kate suggests you look at budgeting as a form of selfcare.
“You are making life easier for your future self! If you approach savings with an air of excitement, it will encourage you to do it more and more, which will remove stress and allow you to meet your future goals faster,” she said.
Tools for Budgeting
Kate said there are several apps and tools to help you budget for those big expenses
Here are a few she suggests:
- Personal Capital
“However, the most important tool you have is an honest look in the mirror,” she said. “If you’re someone who saves better in cash, use cash! If you’re someone who needs an accountability partner–get one. There’s no ‘right’ way to save; there’s only the way that works right for you.”
Persons Banking Company also has a variety of savings account options to consider. Click here to learn more.
Create a Goal and a Plan
Kate said when you plan a savings goal, you should first identify the amount you want to save and a savings deadline.
“Perhaps you have 12 months to save up for a trip you want to take, or 36 months before you think you’ll need that new roof,” she said. “Once you have a timeline and an estimate, you can break down the monthly amount you’ll need to set aside.”
For example, if you want to take a $2,400 vacation two years from today, you’ll need to set aside $100 a month for the next 24 months to accomplish the goal.
“I recommend building this into your monthly budget and doing it early in the month versus towards the end,” she said. “You can automate this savings by setting up a recurring transfer to a savings account, or you could even set up a payroll deduction.”
If you’d rather save in cash, Kate suggested you put a monthly reminder in your phone to swing by the ATM to withdraw the funds.
Be Intentional With Your Windfalls
It’s tempting to use that tax refund or annual bonus on an impulsive purchase, but Kate suggested you be more thoughtful with those windfalls.
“Will the windfall go completely towards your savings goals? Will it not go towards savings at all? Half and half? By having the discussion and making the decision ahead of time, you’ll remove anxiety and avoid a bad choice made in the heat of the moment,” she said.
To Sum it Up
Budgeting for big expenses is easier when you have a plan! Remember:
- Big expenses don’t just include a new car, roof, or HVAC unit. They also include vacations and even your kids’ college education.
- Approach savings with an attitude of excitement and gratitude versus a feeling of overwhelm.
- There’s no “right” way to save, there’s only the way that works right for you.
- When you plan a savings goal, you should first identify the amount you want to save and a savings deadline.
- Be intentional and make a plan for windfalls.
Persons Banking Company offers a variety of savings options. To learn more click here.