One day, the market is crashing, inflation is climbing. The next day, it seems like everything’s coming up roses. No matter how the economy’s swinging, your mortgage and car payments are still lurking in the shadows, waiting to pounce.
And then there are the big-ticket items. A busted water heater often comes without warning and with the potential to blow a giant hole in your finances. A car that’s nearing its end of life. It all seems hopeless. But there’s a way out: Anticipate these expenses, cut them into small pieces, and make them as routine as paying the phone bill.
Define the Goal
Start by identifying your next major financial move. Your trusty fridge is losing its cool after a dozen years of faithful service. Instead of sitting back and waiting for the refrigerator to take its last breath, use your knowledge and common sense to determine the years left. The refrigerator manufacturer suggests with a simple repair, the fridge has three more years of useful life. Now you have time to research to discover the best way to proceed. What type and size do you need? How much will it cost? Any brands or options to avoid? With this information, set specific goals.Identify the Terms
If you start saving for the refrigerator right now, you‘ll have about 36 months. Let’s say you determine that it will cost about $1,600. Divide that amount by the term of 36 months. The result is about $44. You’ll need to save $44 each month, starting now, so you'll be able to replace your refrigerator in three years.Make It Smaller
To make your goal more manageable, break it down into bite-sized chunks. Instead of thinking about the cost of a new refrigerator over a 36-month period, divide it into 156 weeks—the number of weeks in the same time frame. This way, you only need to save $10.26 each week to reach your target.This approach is more psychologically doable and adds a sense of predictability to your financial plan. Consider this a new, recurring bill that you have to pay each week. Over time, it will become as routine and predictable as your mortgage or car payment.