How to Create Financial Invulnerability — 3: Save for Your True Expenses

Estimated reading time: 8 minutes

We all desire financial security in life. But what if it were possible to create such a sense of financial security, so much stability, that you felt practically invulnerable?

That’s the goal of this series, and so far we’ve covered how to stop living paycheck-to-paycheck, and why you need to make a plan for your money.

But that’s only part of the picture.

Sure, you may have budget categories like rent, utilities, food, and entertainment. But if you stop here, it won’t be enough. There is a vital component missing, without which you could be in for some unpleasant surprises.

In this post, we’ll talk about what exactly your true expenses are, and how to start saving for them.

Here are the posts in the financial invulnerability series so you can jump between them as necessary:

• Step 1: Stop living paycheck-to-paycheck
• Step 2: Make a plan for your money
• Step 3: Save for your true expenses

What Are True Expenses

Budgeting is great because it gives your money direction, especially if you follow the principle to give every dollar a job, as set out in YNAB.

But there is a bit of a trap in this.

Imagine you set up your budget to account for all of your expenses: your rent, utilities, groceries, entertainment, debt payments, etc. Maybe you even have a bit left over after all of this, which you use to have a bit of fun, too.

But after a few months, an unexpected expense comes about. Your dog needs to go to the vet, or your car needs repairs, or you need to replace an appliance.

Or it might not even be an emergency like the above. It might be a friend’s birthday and you want to buy them a gift. Or you have an annual subscription which has just come due.

No matter what it is, you now have a problem. You’ve been budgeting, assuming you had a clear picture of all of your regular expenses. But now all of a sudden, you have this extra expense you didn’t account for.

Either you’re going to have to put it on a credit card, or if you followed step 1 and you started to build a buffer, then you have to dip into that.

But the thing is, these weren’t really unexpected, were they? You know you’re dog is going to have to go to the vet at some point. You know your car is going to need repairs eventually. And you definitely know your annual subscription will come due.

So in a sense, you’re inadvertently lying to yourself when you imagine you have an accurate picture of your monthly expenses, because you haven’t accounted for these long-term expenses that are definitely going to come up from time to time.

These are called your “true expenses”, because they are real, concrete expenses that will come due eventually — they just aren’t paid on a monthly basis. But, just because they aren’t paid monthly doesn’t mean you shouldn’t save for them monthly.

The Power of Saving for True Expenses

What if you could account for these long-term, infrequent expenses in your monthly budget?

We’ll get to the how in a moment, but imagine the power this would give you.

You’d now have a far more accurate idea of your regular expenses.

And whenever one of these expenses would arise, instead of scrambling to find the money to cover it — or worse, going into further debt — the money would be immediately available because you had already saved up for it.

And since you hadn’t underestimated your true monthly expenses, you’d now have far greater confidence that anything left over could truly be used for whatever you wanted.

So what would this look like? It can take a few different forms.

Regular, Non-Monthly Expenses

Let’s first discuss the regular but non-monthly expense, such as bills that come due quarterly or annually. For these it’s simple: you’d just split the cost of that bill by the number of months in the term, and save that amount on a monthly basis.

For example, I am subscribed to Amazon Prime, which is now $139 per year, plus 6% tax where I live, for a total of $147.34.

This expense used to make me panic every year when it came due, because I hadn’t prepared for it, so I’d have to suddenly come up with an extra $100+ to cover this sudden expense.

But now, I just save $12.28 every month, and by the time Amazon Prime comes due, I have exactly what I need to cover it. I don’t even think about it anymore.

“Unexpected” Expenses

That’s easy enough, but now let’s imagine your dog having to go to the vet. You know it’s going to happen eventually — if only for shots and the like — though you don’t necessarily know when and don’t know how much it’ll cost.

So you have to take a guess. How much do you anticipate having to spend on your dog (or cat, or whatever else) over the next year? The next five years? What if it gets sick and needs some minor procedure done, or you have to buy some medication for it?

Personally I save $55 per month, which amounts to $660 per year. This covers regular expenses such as dog food, treats, etc, but also infrequent expenses like trips to the vet. There’s been more than once when I’ve been glad I had money in this category.

Yes, this one is a bit more inexact, but you can adjust as necessary. As your pet gets older, you can start saving a bit more, too.

The same goes for periodic car maintenance/repairs, appliance replacement, etc. All of these things will happen: it’s just a matter of when and how much. Better to save for them now and be ready for when the inevitable happens.

And of course, you’ll want to buy gifts for birthdays, holidays, and the like. It’s a good idea to try to save for these monthly as well.

I put “unexpected” in quotes above because these aren’t really unexpected, are they? You just didn’t think of them before.

And so what starts to happen is that the “unexpected” is planned for and easily met when needed. As a result, you have a greater sense of control and feel that you can handle just about anything that comes your way, because you’ve already foreseen it.

Don’t Get Discouraged

Now there can be a bit of a rude awakening when you first start saving for your true expenses. Suddenly the amount you need monthly may be a lot more than you expected.

Budgeting can shine a bright light on what’s really going on in our financial lives. These issues were always there, but they become crystal clear when you start planning for your true expenses.

You may have to cut back in some areas where previously you thought you could easily afford it.

You may also have to ask yourself some very hard questions about your priorities.

But don’t be too hard on yourself. Prior to this, you likely didn’t save for any of your true expenses. Even a few steps in the right direction will make a big difference.

Remember that from a law of attraction perspective, we are trying to create the feeling of freedom and invulnerability, so that you can create more of this in your life.

If you let yourself get discouraged because you don’t have as much to go around as you thought you did, then you’re just creating more feelings of lack.

It’s important to face uncomfortable truths. But it’s also important that your budget is a tool for creating abundance, not lack.

It can be really useful for highlighting your resistance around money, but then you need to actually release that resistance and come from a place of greater positivity.

Instead, deliberately shape your relationship with your budget by feeling the feeling of having plenty of money to go around for all of your true expenses. And until that becomes reality, only save what you can comfortably save for the most important ones.

Wrapping Up

We’ve now completed three steps toward creating financial invulnerability:

1. You first stopped living paycheck-to-paycheck, and started to save a one-month buffer
2. You then gave your money direction by categorizing it until every dollar had a job.
3. And now, you’ve anticipated your true expenses and included them in your monthly budget.

If you’re following these steps, you should already be feeling a lot more financially invulnerable than ever before.

This still isn’t the complete picture, of course, but it’s a large part of it, and just doing these simple steps will do a lot to help you to feel more secure around your money.

You’ll notice that almost by accident, your bank balance will start to increase. This is because you’re no longer just living on the edge, but you now have more and more money just lying around either as a buffer, or allocated towards some future true expense.

And of course by the law of attraction, this creates a beautiful feedback loop: as your bank balance grows, so your feelings of security and abundance grow, which generates even more reasons to feel secure and abundant. As long as you watch out for the pitfalls I mentioned above, this should be a wonderful manifestation tool for you to create even more wealth.

If you are getting stuck in some part of this process, then I’m happy to work with you to get you unstuck and moving in the right direction. Just reach out and let’s discuss how I can help.

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