Tips to Plan Ahead and Save for Major Expenses
Many of life’s most significant events allow you to plan for them ahead of time. This allows you to also plan ahead for the expenses that come with the event. For example, couples typically get engaged before they get married. And, many people spend months looking for a home and building up their savings before putting an offer on a house. When possible, the first and foremost step is to determine what you’ll need to start saving. Costs vary for each major life event, and it’s important to know what you’re in for and what to expect. Consider some of the following points:
- Estimate your expenses and set a savings goal – Research the average amount of savings people typically need for each event. For example, in 2019 the average U.S. wedding cost $33,391, and the average cost of having a baby was $10,808.
- Determine how much time you have to save – If you’re saving for a dream home, you may have 10 years, or it could be 10 months if you’re about to start your family. Determining how much time you have to save will help you know how much to put away each pay period.
- Create a monthly schedule – Having an overall plan for adding to your savings fund and calculating an amount to add at each pay period will ensure you’re on track with your savings.
- Establish a separate savings account for each event– Many people find it helpful to set up a separate account and automatic deposits to that account each time they get paid. This helps prevent you from spending the money you’ve already set aside.
- Include savings amounts in your budget – One of the best ways to stick to your savings goal is to treat your savings like all your other regular financial obligations—as a priority and a commitment to your future endeavors.
Saving For Unexpected Expenses
Sometimes you can’t plan for a major life event. You never know when your car might break down, experience health concerns or any number of emergencies. For these situations, it’s a good idea to have an established emergency fund. Here are several tips on how to build your emergency fund:
- The recommended amount of liquid savings for an emergency fund is six months of pay. We understand that sounds like a lot, so focus on what you can afford to save right now, then work up from there. Here are a few ideas to help you start building this emergency fund into your daily budget:
- Open A Separate Account – Sometimes the first step is the hardest. If you put all your money in your transaction account, you’ll be tempted to spend it. Opening the secondary account, whether it be a checking account or a savings account, is the first step to putting money away.
- Setup Automatic Transfers – Most of us already receive our pay electronically. Instead of having all the money go to your transaction account, start splitting your pay. Even if it’s just placing $10-25 per pay period in that secondary account, you’re starting the habit and getting yourself on the right track. If you don’t get paid electronically, you can still have an automatic transfer setup with your bank to happen on the dates you’re paid, or even once a month when you’re most comfortable with it.
- Build and Stick To A Budget - You need to start by building a realistic budget and ensuring you manage this budget. It may seem simple but paying closer attention to your finances could just be what drives new behavior.
How can I start building my savings?
Ask Washington Trust!
We can talk to you about your life changes and your savings goals and offer many options to help build your savings with the products that will work best for you, your family, and your future!