In our businesses and in our personal lives, it is inevitable that we will encounter large expenses from time to time. When these come up, especially when the expense is unexpected, it can be quite devastating. That is why it is best to be prepared and learn how to save for large expenses. Below are a few tips to help you save for those large expenses.
Okay, this one is obvious, but it is also the most important. In order to save, you must budget. However, many of us do not do this correctly.
First, set your budget in dollars, not percentages. Why? When you set your budget in dollars, you will continue to spend the same amount even if you start making more money. This allows your wealth or profit to grow and gives you a secure amount to fall back on.
Next, budget in terms of categories, not items. This forces you to make decisions each week or month as to what you really need to have while giving you the freedom to make that decision. If you think strictly in terms of items, you will quickly be hit by something you did not realize you would need, and it will blow your budget.
You do not want to give up everything that is fun and relaxing, but by cutting back, you will make your life more comfortable overall since you won’t need to stress every time a big expense appears. This also applies to your business; you should look for ways to cut your expenses without sacrificing the quality of your product or service so you can keep your business running when something doesn’t go as planned.
When you keep the money you are saving in the same account as the money you spend, you will spend it. Keep it separate and remove the temptation to overspend.
Anytime you receive extra money, put it into savings. It is tempting to see it as the perfect opportunity to treat yourself, but that money will do a lot more for you if you save it so you can put it towards a large expense when the need arises.