Someone reading those 5 words above is probably going to have the reaction of, "OMG, I can't even manage to budget for my current purchases." I understand and I sympathize. If that's where you are, I offer these five minute financial fixes, to help right now. Even if today's budget seems a little tight, you may find it is useful to continue reading.
This weekend, I was thinking about budgeting a bit. That's a little odd for me, because I really don't like to store and track every expense, even when services like Mint make it a lot easier. My budgeting thoughts were triggered when I looked at my car that I bought new in 2001. It still runs well (knock on a Sequoia), but there is going to be a time when it needs replacing. There's a time when almost everything needs replacing.
The good news is that replacing most things doesn't cost a lot of money, depending on what's of value to you. I'm not a fashionista, so much of my wardrobe hasn't changed in the last ten years. Besides a new pair of shoes, my next clothing purchase is likely going to be retiring a Wes Welker jersey to a Rob Gronkowski one if the Patriots aren't able to sign Welker long term ;-). Your priorities will likely differ.
The bad news is that there are still some big items that will need replacing. I've been trying to squirrel away some money each month so that when it comes time to replacing things that I need, I am prepared. I decided to make a short list of things that I'm focusing on:
- Replacement Car (2-5 years) - I've got low miles on it (working from home pays off sometimes), so hopefully this is still a few years away. I'll prepare now and hope to not have to use it. I'm hoping to buy used next time and keep it to around $15K, but at the same time I'm looking at the upcoming Ford C-Max Energi and thinking that it is good fit. I hope that my car lasts long enough until I can buy it, or a similar used plug-in hybrid, for my target price.
- Replacement Kitchen (4-6 years) - Currently we rent our apartment in Silicon Valley, but I have a rental property in the Boston suburbs that will need this. Some thing at the property like the washer and dryer have already needed replacing. In any case take a look at your kitchen... and your bathrooms while you are at it and assess what might need updating over the next few years.
- Furniture (Varies) - Since we have some furniture that will need replacing soon, but other that will take a little while, we decided on putting about a thousand a year into the budget. This overlaps with things such as our mattress...
This is all about thinking ahead. Take a few minutes to walk around your home and decide what is right for you. For me it is about, focusing on the first two items on this list can easily run you $20K each.
If everyone followed this method of planning ahead, many financial disasters could be averted. In my local San Francisco area, funding a stadium for the 49ers was a huge issue and recent events about misappropriating funds have made it more complicated. It never should have got to that place. The previous owners of the 49ers should have been budgeting money to replace the stadium from the 70's when they moved in. They had 40 years to budget for a new park. Income shouldn't have been a problem, because the 49ers had one of the most dominate eras of success in the 1980's. I'm a fan of the Patriots, and even though they built a new stadium for the 2002 season, I hope they putting aside money for 2025 or 2030 when everyone needs heliports for our flying cars... or whatever expenses are necessary at the time.
Parting Thought: My friends at Ready for Zero have a lot more information on budgeting available. Cutting back on these expenses will help you plan for those in the future.
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