It’s easy to think you know what your current expenses are and what they will be in the future. The reality may be different. That is why unforeseen expenses are one of the main reasons we do not manage to save month after month.
The truth is that there are always going to be unexpected expenses and it is advisable to have a contingency cushion to deal with them. However, there are other expenses that we tend to include in that category that can actually be planned for so that they don’t make a dent in your finances.
These are the most important ones:
This is perhaps the most obvious future expense because of its magnitude. If buying a home is one of your financial goals, you would do well to plan for it.
The first reason is that to buy a house you will need to have a reasonable amount saved up, even if you take out a mortgage. Most banks will only finance 80% of the purchase value. You will have to contribute the rest on your own, including taxes and certain expenses incurred when formalizing the loan.
Also, the more money you put down, the less you will pay in interest on the mortgage. The difference in these cases can be thousands of euros.
Do you live at home with your parents still? All the more reason to start planning for this future expense, especially as your savings capacity will be reduced when you decide to fly the nest and live in a rented house, for example.
Household appliances (remember they do not last forever)
Does the term “programmed obsolescence” ring a bell? Beyond conspiracy theories to reduce the useful life of things, everything eventually breaks down at some point, and household appliances are no exception. They also have an average useful life that you should be aware of.
If a washing machine breaks down after three years, it is unexpected; however, if it stops working after 11 years and you have to replace it, that’s quite normal. In other words, it is an expense that you can plan for.
The way to do this is to be aware of the expected life of each appliance. That way you will know more or less when it will be time to get a new one:
- Fridge: 12 years
- Dishwashers: 11 years
- Tumble dryers: 11 years
- Washing machines: 10 years
- Microwaves: 9 years
- Vacuum cleaners: 8 years
- Irons: 6 years
With cars it is a similar situation to that of household appliances: they also have a limited life span.
The main difference in these two cases is the size of the change. Getting a new washing machine might cost 200-400 euros, whereas getting a new car will probably set you back at least 8,000 euros, depending on the model you are looking for.
The second is the way you pay for it. A new car is usually accompanied by financing and debt, with everything that implies.
Finally, an older car usually comes with a series of additional expenses that you should plan for: more breakdowns, parking to access certain areas of the city, and having to do an MOT every year, for example.
Education (for you or your children)
This expense is one of the most important and also unavoidable, whether you plan to have children or not.
In the case of children, studying for a degree in Spain at a public university costs more than 1,300 euros per year on average, without counting additional expenses such as accommodation or materials.
The advantage is that by the time this comes round, you will already have had time to consider the costs of educating children from your own experience of school and high school.
What about you? Training is one of the best ways to progress professionally and invest in yourself. In fact, it is even advisable that each year you set aside part of your budget to improve your knowledge.
Your wedding and honeymoon
Getting married costs around 16,000 euros in Spain, a figure that can increase rapidly as you start to plan your wedding.
It is normal to think that your wedding will be small, with only the people closest to you. Will you still be thinking the same way when the time comes to plan it? At this point it’s easy for expenses you hadn’t thought of (flowers, the choir) and others you had underestimated (the open bar, the bus) to start piling up. In addition, there will be people that you will want to be there on that special day.
In short, your initial idea and your budget can quickly go up in smoke. The solution? Plan for the expense and do it by taking into account the average wedding expense in your community or what your friends have already spent on theirs.
An unavoidable expense that should not take you by surprise. Without getting into a debate about the future of public pensions, if you want to enjoy a retirement full of travel and leisure activities, you need to plan for it, and the sooner the better.
Start by finding out what your public pension might be using the pension simulator and then calculate the difference between that income and what you will need to have the retirement you dream of.
The result will be your financial goal, the amount you need to achieve. There are many ways to achieve this. The simplest is to combine savings and investment and start as soon as possible. Time is your greatest ally. It can help you harness the power of compound interest to get more out of your savings.
Here are six future expenses you can start planning for today. There’s one thing they have in common: you don’t know for sure when they’ll arrive, but you do know that they’ll crop up at some point. Getting ahead of them is the best way to stay in control of your finances when they do arrive.