Regardless of your lifestyle, as you go from childhood to adulthood and then grow older, you encounter several milestones that define your life. You may get married, start a family, buy a home, buy a car, start a business, etc. These major life events have one thing in common: they all cost money.
- You can’t make headway in life without budgeting for events like buying a house, getting married, starting a family, etc.
- For most such events, you can plan ahead.
- Build a solid emergency fund to tackle the unexpected.
- If you don’t use a budget yet, learn how to do it and start budgeting as soon as possible.
According to Businessinsider, in 2018, the average US wedding cost a bit more than $33,000. At the same time, the average cost of having a baby was $10,800.
Due to accelerating inflation, those costs have probably increased since then, but the point is clear. To make headway in life, you have to manage your finances in a way that leaves you enough money to cover such events.
All major life events cost money.
You Can Budget Ahead for Most Major Life Events
Fortunately, you can save up for most major life events ahead of time. Many people save for a house for more than a decade. Most have a decent idea of when they want to start a family. Buying a car is usually a hastier decision, but it still leaves room for people to save up.
There are, of course, major life events that are impossible to anticipate. You may have a health emergency, or a loved one may pass away. The purpose of your emergency fund is to give you some degree of financial protection against such events. Building an emergency fund should, therefore, be your top priority as soon as you begin budgeting.
How do you save for the events that you can anticipate?
Estimate Costs and Set Goals
If you’re going to build a fund for a life event like buying a house, you should set a savings goal. Estimate the amount of money you will need to pay for your dream home and set that estimate as your savings goal.
Having a goal provides you with focus and tells you what you need to do to eventually accomplish your goal. Maybe cutting some expenses will be enough to get you there. You may have to increase your income significantly.
Establish a Time-Frame for Your Goals
You need to know how long you need to save for a given goal. If your goal is a house, you should probably consider a time frame of around ten years. If you’re thinking about starting a family, a 10-month period sounds more reasonable.
The reason you need to know these time frames is to understand how to budget for your major life events. You have to save enough to meet your goals, so the quicker you want to achieve something, the more you have to save.
How to Budget for a Major Life Event?
If you want to achieve any financial goal, you need to have a budget. You need to know where your money goes and how your expenses relate to your income.
You should always save for something. Save for an emergency fund first. After that, focus your financial energy on achieving a financial goal. Different life stages entail different major events and financial goals. You will never run out of reasons to save.
You never run out of reasons to save.
Stick to your budget religiously. Save enough every month to meet your goals within the timeframes you have set for them. Do your monthly budget.
Juggling Several Savings Accounts
It is simpler to focus on one goal at a time. But if you’re financially savvy, you can juggle several savings accounts, making progress toward several of your major financial goals.
Setting up a savings account and automating transfers to it as part of your budgeting effort makes perfect sense. If you can save enough for several goals, automate transfers to several accounts.
One of the Best Budgeting Tips: Treat Your Savings as Financial Obligations
Never consider your savings optional. From the perspective of your financial future, they are as important as your current financial obligations, such as your rent, your utility payments, etc.
Trim Small Expenses
Depending on how determined you are to achieve your goals faster, you may want to take a second look at your optional expenses and give them a shave within the limits of reason. While you don’t want to live like a hermit, you don’t need that gym membership you never use, and you can do without the streaming service you never watch. Going out to eat less frequently may also make sense.
Always adapt budgeting tips to your financial situation, needs, and possibilities. Remember, however, that the more you save today, the more you invest in your future.
Budgeting for Life Events You Cannot Anticipate
You can’t create a precise budget for a goal that does not exist yet. Life has ways of forcing various goals on you from time to time through the power of the unexpected.
Your emergency fund, which should comprise at least six months’ worth of living expenses, should tide you through such unexpected goals. It can also keep you from needing credit card help.
Remember to make it your top priority to rebuild your emergency fund if you happen to deplete it.
Make Getting Out of Debt A Major Life Event
If you are currently carrying a heavy debt load, why not make becoming debt-free your major life event? Freedom from debt can help you financially, physically, and mentally. Isn’t it time to give yourself that gift?
ClearOne Advantage can help! Our Certified Debt Specialists are standing by to help you explore your debt relief options and work out a solution customized just for you. Call 866-481-1597 to speak to a Certified Debt Specialist today and get a free savings estimate.