There are times in our life where we are spending far more than usual or earning less than we normally do; it is good practice to prepare for these moments in advance.
We all know that our life has many twists and turns, ups and downs and is anything but straight forward. Some of these things are unforeseen; however there are events for which we are able to plan.
There are periods of our life where our circumstances are different that we know in advance, whether that be seasonal changes or more lifetime events. By preparing for these times in advance we are likely to reduce the financial stress.
Year to year there are moments that cost us more. The Christmas period is probably the most obvious time where our spending increases. School holidays are another period where for many there are additional costs; things like potential increased child care costs, increased activities and for some reduced work hours.
Despite knowing that these periods are coming, many try and absorb the extra expenses into regular spending.
This often results in shortfalls creating financial stress and can lead to the reliance on credit cards and alike.
These periods can be planned for, if we allocate funds throughout the year to be used in these periods we can remove this stress. Essentially we are averaging our yearly expenses and planning accordingly.
The same can be done for periods in our life where things are more difficult financially.
In my opinion the most difficult time is when we start a family. During this period most families have one of the parents not working or working in a reduced capacity for a period of time. Once they return to work many require child care which is quite expensive, even with the government assistance.
In the period leading up to this if a family is able to create a nest egg to use to get them through this period this will greatly reduce the financial stress.
Private school is another example. We all know that private school fees are very expensive, for many this is considered a worthwhile expense. If you start saving for this well in advance then you can average these costs over an 18 year period instead of a six year period. Putting away $100 a week from when your child is born until they complete high school is a lot easier than trying to find $15,000 a year (or $300 a week) for the period they are at high school.
Planning in advance can take the pressure off for these known periods that are a little tougher than usual and can help you avoid the potential pitfalls that financial pressure creates.