Welcome to next-level budgeting. Hopefully you’ve taken the time to track your spending and create a personal budget that allows you to pay all of your bills on time, pay down debt, and build an emergency savings fund. Now, you may want or need to make room in your budget for a big purchase down the road—say your first house, a car, a home improvement project, a recreational vehicle, or the latest smart device.

Part of making room in your budget for this new purchase is considering what kinds of on-going maintenance or repair costs you may also need to pay in the future. Taking into account these costs in addition to the up-front purchase price will help ensure the long-term success of your budget and help avoid regret.

Research, research, research

The time to think about these on-going costs is when you are just starting to investigate your big purchase. Why? Because it should factor into which brand, model, size, type, etc. you choose! Sometimes the more expensive item will have less associated on-going costs. And sometimes the opposite is true.

You want to make a selection that offers you the best value for your money for the life of ownership. Once you’ve decided what size house, which model car, or which brand of laptop fits your needs and your long-term budget, you can establish a savings goal to make the purchase!

Budget for purchase price or down payment

Decide the date when you will need or want to make the purchase. Count the number of months between now and then. Now take your savings goal and divide it by that number of months—this is how much you will need to save each month. You could also calculate it by number of paychecks instead of months.

Your next step is setting up a place to put the money you save for this goal. A basic savings account is probably ideal: it will allow you to automatically transfer funds each month from your checking account, it will keep this money separate from your other savings, and it will be easily accessible when you need to withdraw the money. Remember, the goal for this savings account isn’t to earn you a high interest rate—those types of accounts have fees for withdrawing too much money or taking money out before a certain time.

Budget for on-going costs

One you’ve met your savings goal and made your purchase, you can begin to save for or budget for expected maintenance or repair costs. You can easily re-purpose the savings account you used to achieve your goal to hold money for these expenses. Hopefully from your earlier research you’ll have an idea of best- and worst-case scenarios for these expenses. To be safe, err on side of worst-case and continue to set money aside in your budget for those costs. That way, if something breaks, you don’t have to clear out your emergency savings or endanger paying a bill on time to get it fixed.

Here are some costs to consider saving for or including in your new budget:

  • Increased car/vehicle/homeowner’s insurance expenses
  • Deductible on an insurance policy
  • Regular car maintenance
  • Cost to replace broken parts
  • Specialty cleaning/maintenance (e.g. if you installed a pool)
  • General home maintenance (rule of thumb is to have 1% of your home’s purchase price on hand for yearly repairs)

Considering the on-going costs of upgrading your lifestyle and budgeting for them will help you avoid lifestyle inflation or creep, which can push you into credit card debt. Good luck on your next savings goal!

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