The Value of Planning

Taking a little time to plan is probably one of the best things I’ve done to better my financial situation. Rather than waiting last minute for everything, I went through and figured out ways I could plan ahead and avoid either the stress, or the extra money that comes with not planning ahead.

Some of my own real world examples:

• Car Insurance: Instead of paying the $112/month for my car insurance, I saved up my 6 month premium over time. The next time it was due, I paid the 6 months all at once, which is actually cheaper than paying monthly. This saved me $391 a year.
• Web Hosting: Rather than paying a monthly or quarterly cost of $46/quarter for hosting my websites, I paid for 2 years in advance, which only came to $118. This saved me $132 a year for each site I run.
• Car Insurance Again: I decided the other day that in October I’m going to put a little away each month to pay for my dad’s car insurance for the entire year. It’ll take me a bit, because my finances are stretched as is while I try to pay off the interest-accruing debt. But right now my dad pays $100/month for his car insurance. I don’t quite know what the savings will be, but I’m sure it will be significant.
• Holiday Fund: Holidays are always stressful financially for people. In 2007 I started my own Christmas Fund in a separate ING account, and put a little away each month until I saved up what I thought was appropriate. Now when the holidays come I am stress free. It’s not a monetary savings, but let me tell you, it’s a sanity savings.

Planning is not just beneficial for regular bills though, it’s even more important for unexpected expenses. Everyone talks about saving up an emergency fund for those unexpected emergencies (like a Well pump going up for instance?!). Or how about losing your job and having enough to cover your bills for 6 months? The general rule of thumb seems to be 3-6 months worth of expenses, I’m more inclined to the latter.

In addition to unexpected expenses, how about things you know are going to happen eventually? If you knew it was something that was going to happen, there’s no excuse not to prepare for it.

Right now my mustang is still on the original tires I bought it with in 2006. I’m going to need new tires relatively soon, so I need to figure out how much 4 new tires cost, and how much I can spare each month to put away for them. That way I’ll know my timeline, and I’ll be prepared, and I’m not dipping into my emergency savings because lets face it, this was not an emergency.

Even a rather unnecessary expense can benefit from planning (much like a Christmas fund). My father and I are having the family over to see our new house later this month, and we wanted to order steamed crabs for everyone. So last month I started putting away a little bit each paycheck, calculated from the time frame I knew I had, and without any stress to me I’ll have the total saved up a few days before the cook-out.

Big ticket items should also be planned out if possible. I know in a few years I’ll need a new roof on my house, so I should start saving for that now. I also know I want to buy my dad a pre-owned vehicle so he’s not always driving old clunkers around. I never want to take anything out on credit again, so putting away some money now will save me all the interest that could come with both. Potentially thousands of dollars saved overall.