According to a Bankrate survey, over half of Americans don't have a 3-month emergency fund saved, and nearly two-thirds (65%) of British people say they wouldn’t last three months without borrowing money. And as inflation and economic uncertainty continue to affect the U.S. and the U.K., it's ever so important to budget for a big life event.
Since we all go through important life events like having a baby, getting married, or when our children or grandchildren start college, we need a big sum of money. So it’s important to plan ahead to manage our expenses effectively.
This is why we’ve created a step-by-step guide on creating a life event financing plan.
We're here to let you in on a little secret on how to actually get your finances in order so you can budget for your important event. 💪
If you’re wondering what would count as a big life moment, here are some examples:
- Your big day - a wedding 💒
- Starting a family 👶
- Retirement 🎉
- Change in employment 👔
- Buying a home 🏠
- Once-in-a-lifetime trip ✈️
Now that we've got an idea of major life events, we also know how much these events can impact our savings. But if you know what they'll actually cost, it's much easier to budget and save up for them.
In this article, we'll go through factors to consider when budgeting for a project as well as the process of preparing your budget for these important life events.
We'll also explore how a gold saving plan can be a powerful tool in your financial planning journey.
So, rather than being surprised at each life stage, you can plan ahead and take control of your finances. 💪
How do you budget for your life event?
Understanding your net income is crucial for budgeting effectively for your life event. By taking a closer look at your take-home pay and making smart financial choices, you can ensure that you're on the right track to achieve your savings goals.
Your net income is essentially your take-home pay, which is your total salary minus taxes and employer-provided programs like pensions and health insurance.
Rather than spending more money when you earn more, think about saving more money. If you haven't started contributing to a pension or retirement plan yet, begin now. Try to save at least 10% of your income, and think about saving even more as your income increases.🙅♂️
1. Keep Track of your Spending
Once you’ve figured out how much money you’re earning, it’s time to know where it’s going. There are two types of expenses:
- Fixed expenses: These are regular monthly expenses like rent or mortgage, utilities, and car payments.
- Variable expenses: These expenses may change from month to month, such as groceries, gas, and entertainment. This is an area where you might be able to cut back on.
Credit cards and bank statements are a great place to start since they categorize your monthly expenditures. It’s also helpful to keep a daily record of where you’re spending your money. You can use a pen and paper, an app, or budget templates to keep a record. ✅
Tracking your expenses will allow you to understand where your money is going and help you see how you can save up to get closer to your important life events.
Here’s an example of a budget template you can use as your cheat sheet:
2. Set Realistic Spending Limits
Before going through the information you’ve tracked, list your financial goals, so you have a better idea when estimating costs. This is where your budget for your wedding may come in.
If you’re saving up for your big day, figure out how much you’ll need to save. Knowing that you're saving for your special day (your wedding, for example) can make it easier to reduce your expenses.
While getting married for less than £2,000 is possible, the average wedding in the U.K. costs over £30,000. Yes, really! 😱
Saving for such a major life event can seem intimidating. But remember that when you plan ahead and budget for your big day, you can achieve your savings goal. Also, some of your family members may want to contribute towards the cost of your wedding. They can either pay you directly for some things or gift you up to £5,000 tax-free. With such lump sums, placing them somewhere that gets a good return is important.
While you could put them into a separate savings account with a fixed-term interest rate, you could also create a gold savings account.
You might be thinking: “Is buying gold better than a savings account?” 🤔
Well, having gold savings have some important advantages you can consider when deciding where to place your money for important life events. We’ll cover this in more detail further down.
3. Create a Plan
This is where you bring everything together - what you're currently spending versus what you want to spend.
Start by using the list of variable and fixed expenses you've created to get a sense of how much you'll be spending in the coming months. Then compare that to your net income and the major life events you are planning for.
To make it even clearer, consider setting specific and realistic spending limits for each category of expenses.
You could also break down your expenses even further into things you need and things you want. For example, gasoline counts as a need if you drive to work every day, while a monthly music subscription may count as a want. This difference becomes important when looking for ways to redirect your money to other areas.
As a guide, you can also use the 50/30/20 rule. You may ask: “What is the 50/30/20 rule?” 📊
U.S. Senator Elizabeth Warren introduced the 50/30/20 rule in her book, ‘All Your Worth: The Ultimated Lifetime Money Plan’. Essentially, it’s a budgeting technique that divides your take-home pay into three categories by percentage.
It’s a simple way to break down your spending. As shown in the illustration, 50% goes toward your needs, 30% goes toward your wants, and 20% goes toward your savings or debts.
So when it comes to saving for important life events, like a wedding or welcoming a newborn, you would save 20% of your net income every month.
4. Review your Budget Regularly
Once you’ve created your budget, it's not a set-it-and-forget-it kind of deal. It’s important to review it on a regular basis so you can keep track of it and ensure you meet the budget goals.
Life throws many curve balls, both exciting and unexpected. Maybe you've received a raise at work, opening up new possibilities for your finances. 💼 Or maybe your expenses have taken a dip due to a change in circumstances. 💸 Whatever the case may be, these changes can impact your budget and need a second look.
And let's not forget those triumphs and milestones you've achieved along the way! Reaching a goal is a reason to celebrate, but it's also an opportunity to plan for the next big thing. 🎯
As you conquer one target, it's important to reassess your budget and strategize for your future endeavors
The Power of Precious Metals
Now that you’ve figured out how to budget for major life events and achieve your financial goals, it’s time to figure out where to place your hard-earned money. As mentioned previously, creating a precious metals savings can be a great way to save for your big day or other significant life events.
To help answer your question: “Is buying gold better than a savings account?” here are some advantages of precious metals:
- Stability in uncertain times: Gold has a long history of being a stable and reliable investment, especially during times of economic uncertainty. It can act as a safe haven for your money when other assets may be experiencing volatility. 🌟
- Inflation hedge: Gold has proven to be an effective hedge against inflation. When the value of currencies decreases due to inflation, the value of gold often rises. Unlike paper money, gold is resistant to inflation, making it a reliable safety net for savings earmarked for important occasions. It's like locking a portion of your savings in a tangible asset that historically retains its value. So, if you’re saving for your children’s higher education, it’s important to start saving early and allocate some of those savings to gold, which tends to appreciate in value over time, as shown in the chart below. 💪
- Diversification: Adding gold or other precious metals to your investment portfolio can help diversify your holdings. It's important not to put all your eggs in one basket, and having a mix of different assets, including gold, can help spread the risk.
- Tangible asset: Unlike stocks or bonds, gold is a tangible asset that you can physically hold. There's a certain sense of security and satisfaction in owning something real and valuable. It can provide a sense of stability and peace of mind. 🌈
- Universal value: Gold is recognized and valued worldwide. It holds a universal appeal and can be easily bought, sold, and traded globally. If you buy gold with the right reseller, it can be a highly liquid asset, which means you can convert it into cash relatively easily when needed. That is to say, gold is only liquid when you have a safe, trusted, and accessible place to resell it. Our solution provides just that, meaning you can sell your gold at any time with 24/7 access and zero commissions. But if you plan to resell at a local shop, it might not be as easy.💰
- Potential for long-term growth: Over the years, gold has shown its potential for long-term growth. While it's not a guarantee, historical data indicates that gold has steadily increased in value over time. So, creating gold savings can be a way to potentially grow your wealth over the long haul. 📈
Key Takeaways
- Budgeting for major life events is an integral part of financial planning.
- By understanding your income and expenses, creating and adjusting your budget, and making smart investments like gold, you can navigate these important life events with ease and confidence.
Start your gold saving plan with GOLD AVENUE to help you budget for major life events and achieve your financial goals.🥳
