Anticipate upcoming expenses and plan for them
by Michael Smith (Veshengro)
Unexpected expenses have been blamed for the downfall of many a budget, but just how many of those unexpected expenses were really unexpected? Probably not many of them. The simple truth is that when the refrigerator dies, the car breaks down or your dentist informs you of the need for expensive dental work, there were probably signs along the way to alert you that this day was coming.
It may have been the age of the appliance or vehicle, the development of a strange new sound or a persistent pain in one of your teeth. Whatever the sign, it was most likely noticed and ignored.
Taking this into account, an expense of this nature could not be considered unexpected, but rather unplanned for.
Wouldn't it be better then, to read these signs as a warning of expenses to come and to plan for them?
Anticipating needs and planning for them
Anticipating needs has several advantages. It gives you time to save up for an expense – ensuring you are able to pay with cash, rather than credit. It avoids unnecessary stress; and it removes the pressure to buy now at all costs – allowing you to shop around for the very best deal and the very best product. In essence, anticipating needs puts you in control of the situation, rather than putting the situation in control of you.
Unexpected expenses
So what about those expenses that truly are unexpected? You can plan for those too. Start an emergency fund today, and you'll have plenty of money to cover whatever comes your way – expected or not.
When I was a child – and that is about 40 years ago – and yes, I am getting ancient – people, in the main, and definitely people in rural areas where I grew up, did not buy on credit, of if they did it was payment by installment thing. Generally, however, and I was brought up that was, you did not buy what you had not money for.
So, if you wanted something you saved up for it and if it was something that might only be around for a while or you desperately wanted it then, as a child, you found some jobs you could do here and there to make some money. It worked. It still does.
We are, however, in this situation today because of people, banks and countries, having lived and still living well beyond their means.
We are in a recession-cum-depression but people still throw out things that should never be thrown out as yet simply because they want a new one. Bicycles get abandoned in parks just because they have a burst tire or they are just – would you believe it – forgotten and no one ever comes and looks for them. They just go and get a new one.
When it comes to “needs” that people seem to have as in “I need a new computer” while the previous one is only a couple of years old and still works or “I need a new car” while the old one is only a couple of years old and has absolutely nothing wrong with it people will have to come to understand that those needs and similar ones are, in fact, not needs at all but wants and often wants that can wait.
Saving for a rainy day this planning we have been talking about used to be called but no one seems to do that anymore and then, when they hit a bump in the road, they need to take out a loan and then another one, and so on.
Credit card companies give – or at least used – more and more credit the more and more you spent, regardless of whether you ever paid back your balance. The truth is they never want yo to do more than paying them the interest, really. They make money that way, lots of it.
However, those are also toxic assets; namely people who have such credit and only pay back the interest and not much else. Many of them would not be capable to pay back the balance ever, at least not immediately. And then those that are in such debt blame the credit card companies for giving them a bigger and bigger credit limit.
Do not fall into the credit card trap or the load trap, if you can help it. Save a certain percentage – one you can afford and one that is realistic – so that you have some money to fall back onto if and when need arises and for those wants, go and save for it in an extra fund.
My way still to this very day is that if if do not have the money to buy something I may want either in cash in your hand or in the back – with still backup, then I do not buy it. It is as simple as that and it is not rocket science.
© 2009
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Anticipate needs and save
