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Living In the Future (FOUNDATION #9 Live)

MoneyWise | Sep 12, 2022

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Show Notes

Living within your means” not only involves taking care of the expenses you incur today — but also preparing for expenses you’re likely to incur down the road. We’ll talk about that today on MoneyWise.

  • As we’ve said many times, there are only five basic things you can do with money: you can earn it, you can use it to live on, you can give some away, you can pay it to people you owe — such as a debt payment or taxes — or you can invest it so that it will grow for the future.
  • Those five things are easy to remember: earn, live, give, owe, and grow.
  • On our Monday programs as we start a new week, we often focus on one of those “foundational five” things. On this MoneyWise, it’s the live category, using money to live on.
  • When we say “money to live on,” you probably think of gas, groceries, your electric bill — those regular expenses that occur day-to-day or month-to-month.
  • But we want to focus on another aspect of “money to live on,” and that’s paying for things that are not regular expenditures. And this is where many people get tripped up in their finances: they fail to set aside enough money for future expenses.
  • PLANNING FOR THE UNPLANNED
  • Sometimes, we don’t know about those things in advance, at least not specifically. For example, you don’t know if your car will develop transmission trouble six months from now. But you do know your car is likely to need some kind of maintenance in the months ahead.
  • So it’s wise to set aside a certain amount of money each month in an “auto repair fund” so that when that expense occurs, you have money to pay for it.
  • The late Larry Burkett used to call this “planning for unplanned expenses.”
  • You may not know what’s going to happen or when it’s going to happen, but you can be pretty sure that at some point, something will go wrong with a car, or a furnace, or a lawn mower, or something. And if you don’t have money set aside, those “unplanned expenses” can create a bit of a financial crisis.
  • This is why ‘ is so important that when you set up your budget, you build in savings for emergencies. An even better approach is to get more precise about it with separate savings accounts for different things, such as one for general emergencies and one each for home repair and auto repair.
  • That may sound complicated, but it’s not. Several online banks including Capital One and Discover Bank allow you to easily set up multiple savings accounts with no minimums or fees so you can segregate your savings for different types of “unplanned” expenses and keep it all straight.
  • Well, let’s move now from “unplanned” expenses to expenses we know about in advance and often don’t prepare for.
  • PLANNING FOR OTHER EXPENSES
  • This is September, and we have news for you: Christmas is just a little more than three months away! Now, from when you and I were little kids we’ve always known when Christmas is, and yet every year, it seems to take people by surprise financially. Christmas comes, but they’re not ready for Christmas-related spending.
  • Extra expenses at Christmas are common, not only for gifts but for things like a Christmas tree, replacement lights, maybe seasonal entertainment, or a trip to visit relatives. It adds up.
  • Are you preparing for those expenses? People who are really good at managing money often start setting funds aside in January for Christmas-related expenses. And that’s not a bad idea. But even if you didn’t start back then, you can start now. By setting aside money in September, October, November, and early December, you’ll have a pool of money for Christmas-related things.
  • So, where do you get the money to set aside for Christmas? There’s only one way: Adjust your spending. You have to not spend money on other discretionary expenses between now and Christmas.
  • This involves making a commitment: “I am not going to spend money on this or that now because I am saving it for Christmas spending later.” Or, “We’re not going to go out to eat this week. Instead, we’re going to save that money for Christmas.”
  • We understand that restraining your spending can be challenging, so it helps to have a clear goal in mind, such as being able to buy gifts and do other things you want to do at Christmastime without going into debt.
  • So here is what we want you to remember today: When you think about “money to live on,” think beyond your regular expenses to those that occur only every so often, whether it’s fixing your furnace or buying gifts at Christmas.
  • Being able to “live in the future,” so to speak, is crucial to achieving long-term financial health and stability.

On this program, Rob also answers listener questions:

  • How do you determine the value of a business and go about selling a business?
  • What should you consider when trying to determine whether to purchase an investment home?
  • How do you figure out the wisest way to use savings?

Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app.

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