Save for Large Expenses

I started working with people and their finances twenty years ago, and I’m still amazed by how many people use their credit cards to buy things like tires and furniture.

I want you to catch this: They tell me they don’t have enough money each month to save up for these items, though they do have enough money to pay the credit card company back for these same items but with interest.

The key is to start using the sinking fund approach. The sinking fund is a fund where you prepay for anticipated expenses. Here is an example where someone needed $400 worth of tires:

 Car tires – $400 – Divide by how many months until you need them.

6 months:            $67 per month – prepay

12 months:         $37 per month – prepay

24 months:         $17 per month – prepay

If you charge them on a credit card for 2 years at 24.9%, you will pay $ ___111.18____ in interest.

With just a little bit of preplanning, $111.18 of interest could have been saved. This same concept can be used for larger purchases too, such as large home repairs like roofs, furnaces, and even your vehicle replacement. Planning ahead by saving money in a sinking fund can save you thousands of dollars.

You have a choice, and the choice is yours.

Bryan Cooper

My Financial Life Coach

Dave Ramsey Certified

Delaware, OH 43015

www.MyFinancialLifeCoach.net

Could your organization benefit from one of our financial seminars? Some folks just don’t have the time for a 6 or 13 week class so we offer two, three, and four hour seminars to help jump start the process to financial freedom.

In this seminar the participants will learn how to:

  • Develop in-depth financial and non-financial goals
  • Look at money differently
  • Save money
  • Develop a plan for their income
  • Get out of debt
  • Develop life balance skills such as Time Management, Prioritization Management, and Procrastination Management

http://www.myfinanciallifecoach.net/inner.php?pid=4

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5 Comments

Filed under Auto, Budget, Dave Ramsey, Finance, Personal Finance, Saving Money

5 responses to “Save for Large Expenses

  1. Pingback: Sara’s Journey Through Balance Up – Days 19-21 | My Financial Life Coach, LLC

  2. Pingback: Sara’s Journey Through Balance Up – Days 16-18 | My Financial Life Coach, LLC

  3. Pingback: Sara’s Journey Through Balance Up – Days 13-15 | My Financial Life Coach, LLC

  4. Thank you for sharing your real-world example. It does make life easier and less stressful.

  5. We set up a savings account through an online bank several years ago. Each month, we automatically deposit a set amount to this account to be used for emergencies, like the new tires, or vacation or other fun purchases, like new furniture. Because the money comes out of our account automatically, we have gotten used to living on less. Now, when we want to purchase something, we know the funds will be there — or at least that we are on our way. Love it.

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