Planning ahead

By:

Erin Giglio, CPA

“The only way to enjoy anything in this life is to earn it first.” - Ginger Rogers

Corporations, governments, and we as individuals have struggled for more than a decade with our feelings of entitlement that have led to poor decisions. Now, the effects are crashing all around us. Luckily, there is a simple equation to help us relinquish our feelings of entitlement in exchange for feelings of freedom and peace.

If you don’t have the cash, the answer is no.

If you do have the cash, the answer is maybe.

Emphasis on the first rule.

There are certain things you can count on in life – Christmas comes in December, your car will need brake work in the next few years, you usually take a beach vacation in the summer, the list could go on and on.

Are you socking it away now in anticipation of these things or will you “cross that bridge when you come to it”?

The easiest formula for knowing what to save each month for upcoming items is to make your list, noting the item, the amount that will be needed, and the month and year it will be needed by (if you aren’t sure, be conservative when choosing the date). Then, for each item, write down the number of months until this item will be needed (starting from today), divide the amount of the item by the number of months and write that amount down. Do this for each item on the list and add up your total. Are you shocked? That is how much you need to save each month in order to be able to pay for these upcoming items.

Find a way to fit that number into your monthly budget, then open a separate account at your bank to hold just that money. Don’t touch it and let it accumulate. And when the first item comes due, you’ll be ready.

Nothing feels better than being ready to pay for something. If there is anything we have learned over the past couple of years, it’s that houses don’t always sell quickly, bonuses don’t always come in, and jobs aren’t always available. The only way to know for certain that you’ll be able to pay for something is to plan ahead.