What do you do when you have a large, but known upcoming expense that is out of the ordinary? The simple answer. Save, save, save! The longer answer? Here's what we've been working on…
We've been working hard over the last few months to save what we need to cover our insurance deductible for this year. We have a high deductible insurance plan and the medical bills for pre-natal, labor, delivery, and post-partum care for me and Baby #3 will bring us to our family deductible for this year.
As soon as we knew that Baby #3 was coming, we set a goal: Save $4,000 in cash before the medical bills start coming in. We didn't want to go further into debt to pay for the baby and we had months and months to plan for this known expense. Yes, this was a known expense. It's NOT an emergency expense. It was unexpected in some senses but the expense was known far in advance of it's due date. It had an approximate dollar amount and a date in the future when it would need to be paid. So, as soon as we knew about the expense, we had to start planning for it.
We put a hold on paying down debt and started funneling all extra money, quarterly bonuses, and my freelance income into savings. And we did it! It took about 5 months, but we saved what we expect to have to pay out for baby expenses about 2.5 to 3 months before our goal date! Even better is that we had the cash on hand that we needed to pay for things like blood work and ultrasounds that are billed along the way rather than after labor and delivery.
Here's what seems to be the key for us in setting financial goals: Set a very specific goal with a dollar amount and a date. When you have such a specific goal, it's so much easier to focus and find ways to meet that goal.
What's your current goal on your road to debt-freedom? Share it in the comments!