How to Afford the Big Stuff

You don’t need me to tell you that we’re living in uncertain economic times.

dark rain cloudy umbrella trouble dismal

One day stocks are plummeting and home foreclosures are skyrocketing, the next day things seem to be looking up.

But whether the economy is good or bad, expenses keep rising. There’s the mortgage and the car payments to deal with and all of your other necessary expenses.

But what about the big ticket items? Something like a busted water heater often hits without warning and with the potential to blow a giant hole in your finances.

The secret for handling a big money decision isn’t to grab the credit cards. Instead, you need to anticipate these expenses, divide them into manageable pieces and make them as routine as paying the phone bill. Here’s how it works:

Define the goal. The first and biggest step is to figure out what your next big money decision will be. You may not be aware you have any, but the truth is you have several to choose from. Do you think big medical expenses could arise in the next several months? Is your car beginning to show its age?

Let’s say, for example, your refrigerator is slowing down. It’s still running and cooling, but you anticipate that, at 12 years old, it has about three more years left. Anticipating this gives you something very valuable: time to start researching and saving.

What style and size refrigerator do you need? About how much will it cost? Are there options you should consider? Brands you should avoid? Look into it now.

Identify the terms. If you start saving for the new refrigerator right now, you’ll have about 36 months. Let’s say you determine that the new refrigerator you want will cost about $1,600. Divide the amount of this goal by the term of 36 months. The result is about $45. You’ll need to save $45 each month or $10.50 a week.

Make it regular. View this as a regular bill you must pay and it will quickly become as ordinary and predictable as your mortgage or car payment.

Make it automatic. Set up an automatic savings plan at an online site like SmartyPig.com. That’s a safe online savings bank with FDIC protection, and quite a lot of fun, too. Of course, you’ll be able to make unscheduled deposits any time you want, but you’ll gain peace of mind knowing that money is regularly going into the account.

Start with one goal. If your mind runs at all like mine, about now you’re thinking of several savings goals you want to work on simultaneously. I understand your enthusiasm, but I know from experience that it’s best to start slowly. If you have additional funds, use them to reach this goal before starting on another. In time, as you become adept with managing big money decisions, you’ll be able to handle several at a time.

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3 replies
  1. Betty Thomas
    Betty Thomas says:

    I am so happy to say that over the summer our water softener and ac/heating furnace went out. Dead! Why am I happy? Because we were prepared for the cost thanks to Mary and a fund we contributed to over the past few years. We anticipated that both units were old and wouldn’t last forever. We had the money to make an informed not panicked decision. Also the new appliances are saving us on our power costs. Bonus!! We are also starting a vehicle fund. Our 1995 Toyota 4 Runner with 300,000 miles can’t last forever no matter how good it runs and how well we have cared for its maintenance. Thanks Mary!

    Reply
  2. bigscottk
    bigscottk says:

    For the past 22 years ever since my wife Pam & I were first married, we have been fighting our $$$ much like the Lion Tamer at the Circus. We’ve been having to stand there with the whip & chair and fight like crazy to keep going! Now with the help & guidance of a wonderful Christian Financial Counselor that is hard core Anti-Debt & our Pastor, we’re starting to make the transition to an Orchestra Conductor where we are now starting to be able to stand there & direct where our money needs to go.
    Pam & I have pledged that from now on that if we don’t have the cash in hand we don’t buy it. That includes a everything all of the way up to & including vehicles. Rather than paying a bank or finance company our hard earned $$$ for the “privilege” of being extorted by them to use their $$$, now we’re doing just exactly as Mary Hunt of Everyday Cheapskate/Debt-Proof Living tells how to in this article!
    I won’t lie & say that’s easy. However i will say that now that we finally have hope & can see some light for the first time in years is refreshing beyond measure!

    Reply
  3. Terri Lynn
    Terri Lynn says:

    Love this post about affording the big stuff. And a few posts back, you mentioned saving all your coins. Several years ago, I knew my refrigerator was getting close to retirement. I have a 5 gallon water bottle in the corner of my closet. Whenever I have change, it goes straight into the bottle. I had that money earmarked for a new fridge when the time came. It only took about 3 years, and I was able to pay cash for a brand new, top of the line refrigerator. French doors, freezer on the bottom, stainless, the one I had always lusted after while wandering the aisles of the appliance stores. That huge bottle only had about 8 inches of coins in the bottom of it, but was so heavy we needed a two-wheeled dolly to move it! The credit union where I am a member, will take coins, no matter the quantity, without any fees. Voila! Shiny new fridge. Or, as my sweet Grandma always called it – icebox.

    You are awesome! Keep up the good work:)

    Reply

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