Money is a life essential that is difficult to live without, it’s something you put a lot of time and effort into making. This is why being able to manage money is a necessary life skill. Begin to develop these skills as early as possible, in order to take them into adulthood. Especially if you start a family, your money will likely be divided in multiple ways and your expenses will increase. At different intervals in your life, you may also need to commit to major expenses such. The most common being; buying your first family home, paying for college, or starting a business. How can you plan for these expenses when they come around?
Build an Emergency Fund
If you don’t want any major expenses to catch you unaware, the best place to start is with an emergency fund. This fund is set-aside in case of unplanned expenses like a hospital visit, home repair, or major car fixes. In terms of how much to set aside, it’s recommended to save enough to cover three to six months of expenses.
Having an emergency fund means that when you start saving for a major expense, you won’t be set back if an emergency arises. For instance, if you’re saving money every month for grad school but your family car suddenly breaks down, you could pull from your emergency fund instead.
To build an emergency fund, open a separate account so you aren’t tempted to spend the money. Many banks now offer “Spare Change Savings Accounts” that round all of your debit card purchases to the nearest dollar. Then they transfer the spare change to a special savings account. You can also consider using a high-yield savings account so you can get more bang for your buck. Contribute every month, even if it’s not very much — it’ll grow over time! The most effective are funds you can easily access and withdraw from when the crisis happens.
Reduce Your Expenses
In order to have enough money to deposit into an emergency fund or savings, you may have to reduce your overall expenses. Learning to spend less is also a good teaching moment if you have kids, as they’re susceptible to mirroring your money management habits. Exhibit financial discipline and show them ways they can be more responsible with money. On that note, here are a few money-saving tips that could help you reduce expenses:
Monitor Your Spending Habits
Everyone has different spending habits when it comes to money. While some are frugal, others may be very frivolous spenders. Are you the kind of person that takes time to think about whether you really need the items you purchase or are you an impulse shopper?
Understanding your spending habits can make financial discipline easier to adapt to. One money-saving tip or solution would be to remove saved card details on shopping sites and to delete shopping apps on your phone to avoid temptation.
Avoid Wasting Expenses
Have you ever taken time to see where you are wasting money and how you can get those dollars back into your purse? You may find that you’re buying too much food when you grocery shop and half of it is spoiling before you even get to eat it. In a similar way, it could be that subscription box or gym membership you forgot you signed up for that’s withdrawing from your account every month and therefore contributing to not having enough left over when all is said and done. You can discover these money leaks by looking through credit and debit card statements.
Wastage could also come in the form of buying excess products that you seldom use. Things such as makeup products and beauty procedures especially as a busy mom trying to look her best. Instead, look for ways to be beautiful on a budget. Products like vaseline instead of expensive moisturizers or doing your spa treatments at home with natural ingredients.
Look for Ways to Save Long-Term
When thinking of ways to save, the focus may feel like it’s always skewed toward immediate savings. However, it’s also smart to consider what you could do that may not bring immediate returns, but save you money in the long-term.
For example, investing in a hybrid car could make you eligible for an Alternative Motor Vehicle Credit, or a tax credit you can apply every year when you buy a car that uses alternative fuels. There is also the option of converting to solar energy at home. It helps you reduce the amount you spend on energy — while also doing a nice thing for the planet! Alternatively, another way to save more and spend less is to try pre-paid electricity and only paying for what you use.
Explore Cost-Saving Techniques
There are certain techniques you can implement to help you plan for a major expense, particularly if you’re a student. One is to look for opportunities, resources, or free money you may have access to. For example, one cost-saving technique if you’re a grad student would be to seek out student aid to help with the cost of fees like housing, books, food, and so on. There is also the Lifetime Learning Credit which could get you $2,000 in educational expenses.
Another practical example would be making sure you’re making the best use of any tax credits you qualify for. If you have kids, you could get money back from earned income credit, child and dependent care credit, or adoption credit.
Saving for major expenses takes meticulous planning as well as discipline. However, knowing that you’re able to accomplish a goal because of it should make the sacrifices worth it in the end.