How do you pay for a "big ticket" item?

[Anonymous]

I know this seems like a very naive question, but here goes. We pretty much "zero" our pay checks, so that we have a bunch going to savings (mostly mutual funds) after maxing out our retirement funds, and generally leave enough for planned expenses + a little extra. This year we'd like to do some work on our backyard. My husband isn't really comfortable pulling money out of the mutual funds to do this, but my thought is that this is what it is for (plus as a supplement to retirement, of course). I guess this could also be considered our "emergency fund"- there is probably about $175K in there.

So I was just curious- how do others budget these big ticket expenses?

[Anonymous]

We have an ING savings account and use that for short term funds that we can transfer in and out of checking as needed. We use that for car purchases, estimated taxes, home improvement items, tuition payments over our 529 amounts, etc.

[Anonymous]

I transfer X amount of $$$ from each paycheck to a debit card for these types of purchases.

[Anonymous]

Anonymous wrote:We have an ING savings account and use that for short term funds that we can transfer in and out of checking as needed. We use that for car purchases, estimated taxes, home improvement items, tuition payments over our 529 amounts, etc.

Thanks- is that something you contribute a smaller portion of your salary to that every month? Maybe we should open another account.

[Anonymous]

We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have an ING savings account and use that for short term funds that we can transfer in and out of checking as needed. We use that for car purchases, estimated taxes, home improvement items, tuition payments over our 529 amounts, etc.

Thanks- is that something you contribute a smaller portion of your salary to that every month? Maybe we should open another account.

Sort of. We don't really have salaries - just get chunks of money periodically as clients pay - so I always put at least 50% in ING for taxes, then usually whatever else we don't need for current expenses. When there is too much in the ING account I transfer it to investments. When we had salaries I just transferred to ING when I had an excess amount in checking so didn't always do it every month.

ING has just turned into Capital One. Hoping it won't change things. ING has higher interest rates and is super easy to transfer in and out of. And all online.

[Anonymous]

Anonymous wrote:We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

This is what we do.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

This is what we do.

OP here- yeah, that seems to be the only thing my husband is comfortable with, and what we've done for everything since we've been married (7 years). We haven't started getting quotes for what we want to do yet, but my hunch is that it won't be a "cash flow" kind of thing. So this will really be our first non-cash flow expense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

This is what we do.

OP here- yeah, that seems to be the only thing my husband is comfortable with, and what we've done for everything since we've been married (7 years). We haven't started getting quotes for what we want to do yet, but my hunch is that it won't be a "cash flow" kind of thing. So this will really be our first non-cash flow expense.

Then maybe you could save your extra for a few months? I find it less painful to spend the money if an know ahead that it won't be permanent savings. Save to spend sort of thing.

[Anonymous]

Anonymous wrote:We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

+1

Have a liquid savings account that is not invested for this purpose

[Anonymous]

Anonymous wrote:

Anonymous wrote:We try to cash flow most things. If something costs more than what we can cash flow, we take it out of savings.

This is what we do.

Us too, although I also have a small "short-term savings" account with ING (Capitol One now, I guess) that is separate from our larger emergency fund. I usually have about $2500 in there. I rarely use it but probably will in a month to pay higher than expected taxes. I keep it separate mostly for psychological reasons - I found that if I took money from emergency savings I'd stress about putting it back, but felt more breathing room with the smaller fund because it's not counted as part of our overall net worth.

Weird, I know. But it works for us.

[Anonymous]

I also have a short-term savings account that I can pull from for when I can't cash flow the entire amount of a large home repair, vacation, or something like a large summer camp fee. I mostly fund it through reimbursements for work expenses, medical claims, and my work cafeteria plan, which works out to around 10K/year going in. If it gets much over 10K, I'll move some excess to my emergency savings.

[Anonymous]

I have a lot of targeted savings accounts at ING/CapitalOne 360 now. New Car, Vacation, Home Renovations, etc. The rule is that once money goes into one of these accounts, it can't be spent on anything else. So we have to be sure that it is "extra" money we won't need. Emergency Fund is separate from those accounts. It's mostly psychological, but it works for us.

[Anonymous]

OP, consider a home equity loan or line of credit? If you can manage one, it's just a way to spread out the costs over time.

[Anonymous]

Michelle Singletary, the Post's financial advisor, recommends having two liquid accounts, an emergency fund and a "life happens" fund. The life happens fud is for things like cars, home repairs, major appliances, medical bills, etc.

If you have $175k in emergency, then yes it probably is mostly psychological. Maybe talk to DH about major expenses coming in the next year or two and what portion of that $175 should be allocated for those things? Then contribute to both regularly.