In a given year, you probably have expenses that you know are coming – holiday gifts, family vacations that you take every summer, annual homeowners ’fees, or perhaps a renewal of membership. But just because these costs are predictable doesn’t mean you’re always ready.
If you take money from your emergency fund or use a credit card to cover predictable costs, you may want to consider using one or more “means of discounting”. The jump fund is a savings account designed for certain expenses, which you gradually finance through regular payments. Dipped funds often have a term associated with them, but not always.
You can add cash your budget on expenses that occur at the same time each year, or on planning a large purchase that you want but don’t necessarily need – such as a new sofa for your living room or a gym you’ve been looking at for months.
Either way, sitting down with your calendar and celebrating future expenses is a good way to anticipate predictable expenses and prevent unwanted debt or dive into your emergency fund.
HOW DO RELATED RELATIONS COMPARE WITH OTHER SAVINGS ACCOUNTS?
A savings fund differs from other types of savings accounts – such as an emergency fund or a traditional savings account – in several ways. “The emergency fund is designed for real emergencies, and then your fall fund is designed for a special, anticipated planned purchase in the future that we know will happen,” says Mika Love, accredited financial advisor and creator of The Budget Mom, web. a site with resources to help people create and stick to a budget.
Since they have different purposes, it is prudent to separate funds for discounts and emergency funds.
“I think it’s a good idea to separate your emergency fund from a fund that is drowning just because otherwise it would be a little tempting to dive into your emergency fund for things that aren’t really extraordinary,” he says. Madison Block, marketing communications and programs related to the nonprofit American Consumer Credit Counseling Agency.
Savings funds also differ from traditional savings accounts because they have a specific purpose and target term. This will help you track your progress toward multiple goals, while by putting all your savings in one big bank, you can get confused and lose sight of your goals.
STRATEGY OF FALLING FAMILIES
Most of the funds that are shutting down have a target date, and with that deadline “comes a strategic way to responsibly plan this purchase,” says Love, who currently has 13 funds that will disappear. For example, if homeowners ’association fees have to be paid in May each year, you can start planning ahead to have cash.
Let’s take the HOA example: if the annual contributions are $ 500 and you have six months to save, you need to put about $ 83 a month into your fund. Or about $ 42 a salary if paid every two weeks. Or $ 21 a week. As you can see, it is very customizable.
You can also use windfall revenues such as tax returns or gift money to increase these accounts and reach your goals faster. Just keep in mind: invest in cheaper funds depending on priority and need. Necessary fees or membership must precede desires, such as a new couch or exercise bike.
If you have leftover money in the sinking fund, or keep it there to be ahead of the game for next year, reallocate it to the next priority or, if necessary, replenish your emergency fund.
CAN YOU HAVE ZAMASHA FALLING FAMILIES?
The trick with immersion is to find the right balance. “You can complicate your finances a lot by having too much of that money,” Block says. You may find that having multiple buckets of savings to fund each salary feels overwhelming. Setting up automatic payment can be one way to streamline. Some banks offer customers the opportunity to set up savings buckets in their accounts.
Finding out your top priorities and building funds for the flood is a good start. “You probably don’t need a separate fund for every little expense you expect,” Block says. You can always add extra funds if you find that this strategy works for you.
ARE THE RIGHT MEANS FOR YOU?
This is a low-risk strategy to save expected costs in the future. “I believe that cheaper funds can be for anyone, no matter where they are with their finances,” says Love.
Managing fuzzy funds also “teaches us to create healthy habits in our lives to prepare for things that put us in debt,” Love says.
This article was provided by The Associated Press on the NerdWallet personal finance website. Amanda Barroso is a writer at NerdWallet. Email: email@example.com.
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