9 Future Costs You Should Prioritize Now

It’s time for spring cleaning, and that includes your finances.

Just as you assess what to do with the clutter that built up in the house over the winter, do the same with your budget. That includes looking at your monthly expenses and adding in the financial moves everyone should set, prioritize and fulfill as part of their monthly spending.

Set aside some time this spring to prepare and get your bank account ready for these future costs.

You never know when a crisis will strike your family that could lead to a financial crisis. It could come in the form of a natural disaster, such as a weather or climate event. In fact, in 2022, the United States saw18 such disasters that each had financial losses of more than $1 billion, according to the National Centers for Environmental Information. Or it could be a medical emergency that pinches your pocketbook. Unreimbursed medical expenses cost Americans $433.2 billion in 2021, the Centers for Medicare & Medicaid Services reported.

Realities like those make having an emergency fund a necessity, as do the prospect of job losses.

If you dipped into your emergency fund last year, spend 2023 rebuilding and adding to it. Remember, your emergency fund should contain between three to six months of living expenses in the event of an unexpected circumstance. Try to set new financial goals for your emergency fund, too. Can you cover more than six months of living expenses? Aim to increase this fund when possible.

You might still be poring over your 2022 financial paper and electronic trail to put together your tax return before the April deadline. If you weren’t as organized as you could have been, it isn’t fun going back through time to figure out your taxable income and potential deductions without missing one.

As you’re doing that, start prepping for the 2023 tax year. One key is to begin putting some money away each month if you anticipate owing any taxes, said Amy Greene LoCascio, managing partner at Eamon Capital Management.

On the taxes note, start that paper trail for tax season. As taxable events happen in your life, organize the relevant paperwork and place it in a space where you can easily find the materials. Continue adding more tax documents throughout 2023 as warranted.

Do you have any high-interest debt, such as credit cards? LoCascio said interest rates are expected to continue rising in 2023. Put together a budget you know you can stick to and stay on track. Use it to start paying down any high-interest debt you may be carrying.

Additionally, watch your interest rates. Review your credit card statements each month to see the rate information and if there are any interest rate charges.

You’ve seen the cost of heating your home go up and up over the past few months. Be sure to keep monitoring your utility bills throughout the year to see where you can save money.

Households should look into working with energy providers that have a ceiling as well as variable pre-payment options, said Jacqui Kearns, chief brand and strategy officer at Affinity Federal Credit Union. 

“Whether your home is fueled by oil, natural gas or electricity, there are partners who can help lock in a monthly payment as well as secure a price range you might pay for the contract period,” Kearns said.

In 2022, it was reported the majority of families spend 20% of their household income on child care expenses. If you are among these families, Kearns recommends looking into alternative payment options.

Some examples include families that pay month to month and caregivers who offer alternative payment plans that require upfront payment for longer set periods of time. While Kearns said prepayment does not guarantee that you’ll avoid a long-term rise in costs, it can greatly help families budget and plan for other household expenses that will continue to rise each day.

Those with a variable rate mortgage are recommended by Kearns to find a fixed rate option. This can help keep a payment steady during financially uncertain times. 

“Between your principal and interest, your variable rate can adjust significantly and dramatically impact your cash flow,” Kearns said.

There are other ways homeowners can arrange prepayment or pay down the loan to shorten the term. Kearns recommended reaching out to a representative of your local financial institution to learn more.

Some medical costs are predictable enough for many to plan for and prioritize these expenses. Other expenses are not covered by insurance. Bruce A. Tannahill, ChFC and estate and business planner at MassMutual, recommends planning for the unexpected in a tax-favored manner with a flexible spending account (FSA) or health savings account (HSA). 

If you have prescriptions filled regularly, or if you have a condition that requires frequent doctor visits or medical expenses, it’s best to prepare for those costs now.

The new school year is months off, but it’s a costly time of year for parents. In its 2022 back-to-school survey, Deloitte estimated that families would spend $661 per child in kindergarten through 12^th grade for school expenses, up 8% over the previous year. A similar increase this year would put back-t0-school spending per child over $700, and it’s wise to start socking away some money now.

“If you have school-age children, you can plan for school-related expenses. Those include not only clothes and school supplies but the cost of extracurricular activities, events and opportunities,” Tannahill said.

The resurgence in weddings experienced throughout 2022 is set to continue well into this year. With the COVID-19 pandemic largely behind us, many are making a concentrated effort to save for and be part of upcoming special events. 

While we may be in a financial landscape that currently reinforces saving as much as possible, it’s OK to put some hard-earned money toward a special celebration.

“When a family member or friend is getting married, you can plan for related expenses like travel and gifts,” Tannahill said. “You can prioritize these types of expenses because they are important to you and your family members, can be anticipated, and planning for them can minimize the costs.”

Jami Farkas contributed to the reporting for this article.