Most people don’t really budget for things that are large on a yearly or even monthly scale, but you can and probably should.
For example, I know that I use my headphones a lot and being without them would be really annoying. Budgeting based on buying them asap because I need them is a really painful way of managing that cost because I can’t do anything else at the same time and it is expensive. If instead I set aside a smaller amount while I still have working headphones it is much easier.
My formula for working out the cost is fairly simple. How much does it cost for an item to fill the need? How long do I expect that item to last in the worst case? How much would I therefore need to save per week for that cost to be saved before the current item needs replacement.
My headphones cost around $100. I expect to need replacement not sooner than about 16 months. So I should save $75 per year which works out to less than $2 per week. If I just save $2 per week I will hit my goal of $100 within the year and of something goes wrong earlier I can make the difference up the normal way. If I end up not needing a replacement by the time I hit my goal I can keep saving for a higher cost option or move that saving to another goal to boost that.
What I guess I don’t get with this advice is, if you have the ability to save $X per week, why do you need to know about your headphones, why don’t you just save $X a week?
I understand that people seem to generally use up their expendable income immediately, but for me, I simply saved whenever I didn’t need to buy something. So in the background, without even thinking about it, money just accumulates. And then, when my headphones break, I just use some of that money that accumulated for headphones.
That obviously only works if you have expendable income. But that’s what the original advice requires anyway, it requires this ability of $2 savings per week, so the expendable income is already obviously there.
I just feel like it’s so much work to do this for every single thing, when instead you could just simply save whatever is “over” your survival needs, and then draw from that fund whenever necessary without thinking about each item individually.
It helps decide how much to actually save, and how much you can spend immediatly.
Yes this post seems to come from a place where savings arent a thing or at least unusual.
I come from a poor background, so having any large pot of cash was always risky due to “emergencies” requiring those funds. I got out of that living situation and now finally have more money than my living expenses for the first time. None of my family were actually good with money, so that is the background for this post. So yes, correct.
Thought so. Didnt want to sound judgy or anything, many people arent lucky enough to “learn about money” growing up and it sucks. Good for you to be able to afford more than you need for survival now. Dedicated cash pools for your goals or eventual replacements are a good step forward especially for people who arent used to having “spare money” and tend to spend it immediately.
Yeah, lots of people from my background are sensitive about it but honestly, nobody around me understood money and therefore couldn’t have taught me. I knew very little about money until later in my adulthood and at that point I didn’t have more than I needed. Now I have a little bit of excess and managing that has been a great learning experience.
This. Budgeting is a nebulous topic which means a lot of different things in different contexts.
For a household, if you don’t have any surplus then skip “budgeting” and go straight to minimising costs and increasing income where possible. If you do have surplus then, well… save it for something.
Im not great with budgeting but this is what I do. I just keep a pool of money for ‘whatever’ purchases.
It is a good teaching tool for budgeting though, especially with kids or people who never have budgeted (which is most people I’ve worked with, sadly).
I didn’t budget for much of my adult life because I had barely enough money to get by. That changed,.and I had to learn how to budget because I knew I would still be living hand to mouth if I didn’t. No matter how much I made.
I break my savings down into broad categories. It helps keep me honest. I can’t imagine the overhead of budgeting for every single item I might need to replace someday.
This is my thinking too. I had a housemate who earned the same as me and paid the same rent, and yet every month he managed to spend all his money while I saved a good chunk. Our pay was okay - not loads, but we lived in an area with a relatively low cost of living so the money went much further than it would elsewhere, so at least saving up a safety net should’ve easily been doable. I suppose it didn’t help that he took every opportunity to go on holiday half way around the world… I don’t think I’m miserly, I just don’t buy random stuff I don’t need. I also refuse to use Amazon, which probably makes things easier.
okay, but what if you die in an accident and didn’t use up your money you worked hard for. would be a real shame. the thought alone makes me want to be immortal
It wouldn’t be a shame, I’d be dead. I can’t worry or be upset about anything then. I get your point though - no point saving up money just for the sake of it. I’d like to buy a house eventually so that’s something meaningful to work towards, but I don’t think I would have any regrets about not accumulating random stuff if I died tomorrow.
well, it doesn’t have to be random physical things, but could be tickets for events, gambling, etc. i like to gamble a bit on the stock markets, for example. it’s like horse racing, but you can decide where the finishing line is.