One of the best reasons to cut down on your bills and monthly costs is that soon you can afford to occasionally splurge on a big expense. However, having the funds available doesn’t mean you should blow your budget on one big payment. It may feel good initially, but you’ll have to start saving all over again. Here are a few suggestions to help you protect your savings, but still acquire those dream purchases.
Buying a first home is every family and young person’s dream, and it’s probably the reason why they started saving in the first place. The budget for buying a house doesn’t just include the cost of the house itself, but the household expenses and emergency funds in case something breaks. You won’t need to spend exactly 20 percent of a down payment to afford a house, but it will increase your chances of getting a good rate. Ideally, a mortgage lender will calculate your repayment plan so it comes to 25 percent of your income. If you haven’t managed to save 20 percent, there are other options you can look into. Your state may have its own programs for first-time homebuyers.
Whether this is your first car, or you’re replacing a vehicle that has broken down, you’ll have guessed that a safe, good quality car is not exactly cheap. This is before you’ve factored in the cost of insurance, gas, breakdown cover, and tax. Spread the cost of your vehicle by looking into the best 72 month car loan rates. As an added bonus, keeping up with the repayments will help you build good credit for the future.
Life happens when you’re busy making plans. Just when you think you’ve got your finances in order, a pipe bursts, you miss a repayment, someone falls ill, or something breaks down. One little accident can force you to dip into your savings and leave you short for the month. You can’t predict the future, but you can alleviate some of the sting by planning for financial emergencies. Make a list of common seasonal expenses, such as property taxes, car insurance, Christmas and birthday presents, and dental bills. Then look at your bank and credit card statements, to see what irregular expenses you paid for with credit. Once you have these variables, you can calculate how much extra money you can afford to set aside in a different account. Make the payments to this account automatic, ideally so you can forget the account exists while it grows. The next time you need to dip into your savings for a rainy day, you can be pleasantly surprised when you rediscover this emergency account and see how much you have saved.
Once you built up your savings again, it might do you some good to go on a short vacation to relax and recharge. Cheap holiday packages, let you enjoy up to seven nights in an exotic country at a fraction of the usual price.