You may not realize it but there are big life expenses that you will have to face at one point in your life. The problem begins when you are not prepared to go through them financially. You might tell yourself that you already have too much on your plate at present to worry about tomorrow. As a result, you will just take care of what comes in front of you when they do.
It is normal to feel this way when you are overwhelmed with so much that is going on in your life. If you are living from one paycheck to another, planning for the future seems to be a luxury you cannot afford at the moment. However, you need to remember that if you fail to plan for your future, you are planning to fail.
These big life expenses will not wait for you and come at a time when you are ready. Some of them might even come into your life when you least expect it. This can be a big blow to your finances especially when you are trying to make do with a tight budget. Anything out of the ordinary such as a sudden expense can put you off track.
The good thing is that if you plan ahead and if you are consistent with it, you can manage these big expenses in the future. If you constantly keep putting it off, you will have a more difficult time with them. One of the first steps you need to do is identify these expenses so you have an idea of what you will be dealing with.
One of the big life expenses you need to think about is a job loss or when you choose to look for another job. It could also be the time when you decide you will put up your own business. All these decisions will severely affect your income stream. Your expenses will not wait and stop for you until you get your finances in order again.
In these instances, you need to make sure that you have a reliable reserve fund to keep you afloat. If you lose your job, getting a new one can take anywhere from days to a few months. This depends on various factors such as the state your industry is in and even the leas time you have before you leave your current job.
Your reserve funds will have your emergency fund as well as your reserve funds. These two work hand in hand to make sure that you are able to cover all your expenses in times of need while you look for a new source of income. To get started, check how much your expenses are every month and save up for that. The more months you have in reserve, the longer you have to look for a new job. Start with a small amount at first so build up the habit of saving. Once you start earning more in the future, start saving more.
One of the big life expenses you need to prepare for is saving up for retirement. This is inevitable once you reach a certain age. Your body will no longer be able to function the way it used to. Retirement can also be that calling to start enjoying life. Some people yearn to retire as early as possible to give them the chance to enjoy life longer.
According to Gallup, the average retirement age for Americans is 66 years old. Depending on where you are present, this gives you a pretty good timeline on when you would be retiring. You need to prepare for this event since focusing on it early gives you the chance to retire early. This is usually the target for a lot of people as they try to get out of a daily 9-5 job.
One thing you should keep in mind is that the type of retirement you will have depends largely on how you prepare for it. Much like most of your long-term goals, habit building is a crucial part of the process. Once you get the hang of it, it becomes second nature for you and you begin to set aside money for it without thinking much about the amount.
As you get older and eventually retire, the time will come when you need to start looking at long-term care. This is the time when you cannot take care of yourself or need help with your everyday activities. Forbes shares that Americans can expect to pay over $3,800 a month for homemaker care. This is an amount you need to factor in when preparing and saving up for your retirement fund.
Most people think about long-term care as being in a nursing home simply because you cannot take care of yourself anymore. Simple home chores such as cooking, cleaning, or even taking a bath will start to become a difficult thing to do. You might need to depend on other people for help. That is why you would have long-term care as one of the big life expenses you need to save up for.
It would also help to keep your body as healthy for as long as possible and you need to start now. Much like how you deal with your finances and saving money, this boils down to a commitment to creating a healthy habit. Start with an activity that you love which will keep you moving. It can be swimming, jogging, or even simply brisk walking. The idea is to start with what you already love doing and build on that to keep your body healthy. The healthier you are, the longer you can take care of yourself and even help you enjoy retirement longer.
Tips to help save for big life expenses
Now that you have an idea of what these big expenses are, it is time to look at the many ways you can start saving for it. Here are a few of them worth looking into.
Identify your target
As discussed earlier, there are big expenses you need to start saving up for. You can still prioritize these to help you focus better. It is also important to identify the exact amount you have to save up. This gives you a concrete goal to aim for. This is better than having a rough amount in mind that could keep on changing depending on how you feel.
Just like with retirement, you need to make sure you know exactly what you need to save up for. This means you need to have an idea of what you want to do in retirement. If you want to travel a lot, save up for it. If you are going to pursue a hobby in retirement, you need to factor in the costs, and the possible income it can bring.
Create a realistic plan
Once you have that target for those big life expenses, the next step is to create a realistic plan. You need to make sure that what you put together is doable to help you achieve it. If it becomes too big of a target making it close to impossible to reach, you might lose interest in it real quick and just drop the whole plan altogether.
One tip you can look into when creating and implementing a plan, be sure to break them down into smaller tasks. A $2,000 a year plan to add to your emergency fund might look like a lot of money. However, it is only about $1,000 in six months or $500 in three months. That is just a little over $160 a month or close to $40 a week. It helps to break them down into smaller goals to help you reach your target.
Create a habit
As discussed earlier, creating a habit is an important part of the planning and saving for future needs. The idea with this is starting with a small amount it would not hurt your finances if you start doing it. The smaller it is, the easier it would be to also commit to it which is the start of a healthy habit. The longer you stick to it, the easier it would be in the future. You can slowly make adjustments as time goes by.
You need to prepare for big life expenses because there are times when they come to you when you least expect it. The sooner you prepare, the better prepared you will be in the future.