We all go through financial ups and downs and it sometimes happens at certain times of the year. Our budget fluctuates with anticipated and unanticipated events triggering us to take a closer look and see what happened and where.
If you’re not yet budgeting, please start. A great place to begin is to download my free budget template. It’s simple, yet effective and has served me well for years.
Now back to spurts. How do we manage spending spurt and optimize saving spurts? It all comes down to planning ahead for spending and making sure you lock in and optimize your savings opportunities.
Spending Spurt – Major Holidays
The amount of spending on holidays varies on many different factors including the ones you celebrate, what types of gifts you buy and for whom. Just to add a statistic, American Research Group reported for 2016 an estimate of over $900 only for the holiday season.
For many $900 would require saving and budgeting throughout the year. The alternative is to rack up credit card debt. Unless your charging your card, have a card with a zero percent interest rate, pay off the balance each cycle in full, and rack up points for shopping, this is not recommended.
If you plan in advance, you can allow yourself more time to compare prices and what you are actually receiving for those price differences.
For my recent anniversary, I actually decided to overlook a hotel that offered free breakfast. Why would I do that? Well, normally I would not. However, in this case, we were just staying for one night and the breakfast offered was cereal croissants, bagels, and other basic items; a continental breakfast.
The hotel rooms were not spectacular either and I suppose that’s why they could afford to offer free breakfast. I thought, hey it’s my anniversary; I’d rather stay in a nicer hotel and splurge a bit with a hot or American breakfast in the morning.
So I found a room that was about $35 more per night at a nicer hotel that had a rooftop pool and terrace. The rooms also looked a lot nicer with updated furniture. Finally, it had many more reviews on Google and an overall higher rating.
I was able to plan in advance and compare multiple hotels and multiple room types to find the one that best suited my needs. And I booked from hotels.com, which was cheaper than the hotel’s own website.
Spending Spurt – Big Expense Item Coming Up
I like to earmark funds for big expenses that are coming up, again planning ahead. For example, I didn’t get my tires balanced and rotated in a long time and I knew that front brakes were needed soon. So I earmarked some funds for these expenses. It isn’t a hit in a budget because it’s anticipated.
Planning also allowed me to find deals on tires. I ended up spending around 85% of the funds I earmarked for this automobile maintenance expense. It’s a nice psychological feeling when you save by play conservatively and over-budgeting a bit. 🙂
Saving Spurt – Bonuses
If you’re expecting an upcoming bonus; congratulations. Now you can plan what you will do with the extra income. Hopefully that planning will include saving and investing a good portion of it.
If you aren’t expecting a bonus and receive one, that’s really good! You can save and invest even more because you didn’t have anything lined up for the incoming cash flow.
The key is to lock in the incoming cash flow by doing any one or more of the following:
- Increase your IRA contribution up to the annual limit ($5,500 for 2018) if possible.
- Increase your 401k contribution to the annual limit ($18,500 for 2018) if possible.
- Deposit it into your brokerage account and invest.
- Secure a down payment for the purchase of a rental property.
- Invest in a high yield CD.
Saving Spurt – Three Pay Days In One Month
If you get paid every other week, a couple times a year, the stars will align and you’ll receive that extra paycheck! This is an opportunity for a major savings spurt.
You should think to yourself, hey I didn’t receive an extra paycheck and time it just right so you can transfer the whole thing over to a savings account. Ok, maybe treat yourself to a drink or latte.
Some employers even have a couple of pay periods a year where the health insurance premium is waived! This again presents an opportunity for a bump up in savings!
Saving Spurt – Possible Tax Refund
If you usually receive a pretty big tax refund, this is an opportunity to save. In the past, I used to get large refunds and most if not all of it went into savings. There used to be an excitement and anticipation when tax time came as it forced me to file as quickly as possible to get that fat refund.
Now the refund is not as big. This is attributed to optimizing my tax situation such as exemptions so there is more money for me at each pay period. Getting a refund is exciting, but remember it is just that: a refund of your own money.
If you are like the past me and receive a large refund each year, consider speaking with a tax professional to see how you can get more from each paycheck now rather than a big chunk of your own money later.
Your finances are a reflection of your life. There are ups and downs, highs and lows. It’s important to manage both accordingly.
The best way to manage is to plan and expect. Expecting things in life forces you to plan and when you plan you are in a better position to assess your financial situation and goals.
The key here is budgeting. Even budget for miscellaneous things because those expenses can creep up over time and surprise, no scare you.
Join The Discussion:
- How do you plan for spending spurts throughout the year?
- Do you optimize spending spurts by capitalizing on credit card points, rewards systems, and discounts?
- What did you do when you last came across unexpected cash inflow or an outflow?
I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!