How to plan for large one-time expenses.

As with all financial planning, being prepared and planning ahead is key to being successful. Preparing for larger one-time expenses is no exception. Whether it be saving for home repairs, renovations, or major purchases like appliances, or a vehicle, you want to be prepared. Many are unsure how to incorporate those larger expenses into their budget, resulting in using their emergency fund, or relying on credit to cover them. Below are some steps that can help you in ensuring you are prepared when it comes time to plan for those expenses.

1. Identify the upcoming large expenses and prioritize – Make a list of any upcoming one-time large expenses that you anticipate. Prioritize them based on urgency and importance. For example, a new roof may take precedence over a family vacation. 

2. Estimate costs – To best plan for large expenses, it’s important to have a cost associated with each expense so you know how much money needs to be set aside. If needed, obtain quotes for repairs and renovations, research prices for items you plan to purchase, and don’t forget to factor in taxes, warranties, and contingencies. 

3. Set savings goals – Based on the estimated cost, set a savings goal for each expense. Break down the total amount into manageable savings targets that can be incorporated into your budget, considering the time frame and urgency of the expense.

4. Review budget – If you are finding it hard to incorporate extra savings into your budget, take some time to review your budget. Identify any areas where you can cut back or reallocate funds towards your savings goal. Consider reducing discretionary expenses (cut back on streaming services, dining out, entertainment, etc.) to free up funds for savings. 

5. Create a separate account – Open a separate savings account for these larger one-time expenses. This account should be separate from your regular chequing and savings account to avoid temptation to use the savings for other purposes. With online banking, you can easily open multiple savings accounts from your own home and set nicknames to keep all saving accounts separate.

6. Automate savings – As with any savings goal, if you can set up automatic transfers from your primary account to your savings accounts, it ensures consistent contributions towards your goals. Many set it up to transfer automatically on pay day, so you don’t have to worry about if the funds are available, and it prevents you from forgetting to transfer it, or to be tempted to spend elsewhere. 

7. Track progress – Monitor your progress towards your savings goals. Keep track of how much you have saved, how much you still need, and the urgency of the goals. If circumstances have changed and one goal is now more urgent than it was when originally budgeted for, adjust your budget to account for those changes. 

8. Anticipate unexpected expenses – Build a buffer into your savings plan to account for unexpected expenses or emergencies. Having an emergency fund prevents having to take from other savings, or rely on credit to cover those emergencies, delaying any progress towards your large expense savings goals. 

By planning for larger upcoming expenses, staying disciplined with your budget and saving goals, you can reach your goals on time, and avoid financial stress.

If debt payments are preventing you from being able to incorporate any savings into your budget, there are options. 

If you are looking for advice, or a second opinion about your debt, it does not cost anything to talk about your options. Every financial situation is unique and viable options can differ from person to person. A conversation free of judgment and cost, is the first step to determine options for debt that make sense for you. For a free consultation, please call or text (506) 645-1814 or email jaime@tackledebt.ca; or visit www.tackledebt.ca.