Budgeting: Large Expenses
Working large expenses into your budget
When a large expense is suddenly in front of you or in the near future, be prepared. Whether you have an unexpected car repair, need a washer and dryer for your new home or have a planned large expense, such as a family vacation or Christmas gifts, plan ahead so you are prepared to handle these large expenses with little or no stress. No matter what your expenses are, a one-time expense that you do not allocate in your monthly budget or a yearly expense that you currently do not have in your budget, the good thing is, you can begin budgeting for these planned or unplanned one-off expenses now so they don’t sneak up on you. Most importantly, you do not want to find yourself making these purchases using credit if you can avoid it.
It doesn’t matter if you budget weekly, monthly or yearly, take a look back at your bank statements or excel spreadsheets to see how much you spent. It’s possible that some of your one-off purchases are expenses you will incur yearly, such as vehicle registration or taking your pets to the vet twice a year. Once you identify these expenses, you can accurately budget for them in the upcoming year so they don’t come up as such a surprise.
While some expenses are unavoidable, there are other large expenses that are not mandatory but are nice to have. Some of these include Christmas gifts for your friends and family or purchasing the latest and greatest cell phone. Keep in mind that some larger purchases may really be wants. Plan ahead by sitting down to determine how much you are willing to spend for the items or events that are wants. More importantly, understand how much you can afford. By planning in advance, whether 3 months or a year, you can edit your budget to incorporate your larger purchases into your monthly budget. For example, instead of financing the latest phone, you can choose to forego eating out or to skip out on the newest pair of shoes to stash away this money every month, saving for your new phone. Decide what luxury expenses are important to you and what expenses to let go temporarily while saving for a specific goal. You may surprise yourself, after a few months, you may find that you’ve saved enough cash to pay for your large expense vs. opening new credit or using a credit card!
At the end of the day, making large purchases may seem unattainable but you can definitely make it a reality. With a little bit of budgeting and possibly cutting back in certain areas, you won’t stress about financing what you need or paying back an unwanted loan. Choose to put money into your emergency fund for large purchases or build a specific fund to fit major purchases into your budget. Rename specific savings accounts, if possible, to keep your eye on the prize!
If you need help developing your budget, visit your financial institution or we welcome you to visit First Community Credit Union to speak with a Certified Credit Union Financial Counselor that will sit down with you to figure out the best budget for you. Oh, and it’s FREE! Learn more here.
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