Do unexpected car repairs, quarterly insurance payments or unexpected medical bills find you hard pressed to squeeze even one more dollar out of an already stretched monthly budget? These are inevitable expenses and sometimes can put you under a stress condition when you need the cash to pay for these emergencies and unexpected expenses. But if you learn to budget for these emergencies events and save in advance, you will be at a better position to handle them.
Like most of Americans, you may stretch your income to cover the regular monthly expenses, and always choose to ignore or not to think about the brakes that are getting spongy or the plumbing that's beginning to make strange noises. And you end up a surge on your monthly expenses when the brakes wear off and the plumbing break out.
Planning and saving for those events can help prevent an ordinary life from turning into a crisis and can also cut down dependence on credit cards. Not having savings is a major reason people get into debt.
Here are some steps to help you get started to plan for your emergency fund, the "Saving" fund which will help you prevent financial disaster.
1. Identify your irregular expenses
Analyze your pass credit card statement and checking account registers to identify your irregular expenses occur throughout the year. Examples of these irregular expenses are property taxes, insurance premiums, vacations, car tune-ups, holidays and birthdays. List down in a piece of paper all the expenses which are not spent in monthly basis.
2. Write the anticipated amount on the calendar
In most of cases such as insurance premium and property taxes, you will know when the expenses are due to occur. And for those unknown cases such as car repair and plumping repair cost, try to anticipate their expenses and list them somewhat earlier than you actually expect them to come up. Be sure to update your calendar as you discover more expenses.
3. Plan-in the non-monthly expenses into your monthly spending
Based on the foreseen amount and anticipated amount that are captured on your calendar, plan ahead your non-monthly expenses into your monthly spending. For example, you know that your car insurance is going to due on May, set aside small amount of your money for this purpose starting on February. And when May rolls around you can transfer the expense to your spending plan and have money available to pay it. Setting aside even a few dollars each month for foreseeable expenses can prevent larger money woes ahead.
Sometimes, you may find it hard to set aside some extra money from your monthly income; but remember, repairing your car or paying your insurance is not optional expenses and you need to spend it soon or later. So you need to find a way to reduce your monthly expenses so that some money can set aside for emergency fund. You may need to track your spending; then, reduce or cut the optional expenses such as entertainment, dinner at restaurant and other impulse purchase, the money save from those optional expense can be put into your emergency fund.
Tips for Successful Budgeting
Budgets can be tricky. They seem so simple. All you have to do is subtract your spending from your income and have money left over. Then you set spending goals and stick with them. Easy? Not for most people.
The majority of budgets fail for the same reasons. With a few tips, you can start your budget off on the right foot.
Tip #1: Look to your spending
The vast majority of consumers cannot simply use a preset budget and succeed. We all have different necessities and wants. While gasoline may be a large expense for my family due to commute times, it may not be a consideration for someone who takes the subway to work. One family eats differently than another.
The key is to look at what you are currently spending and find ways to change it. Look to cutting back as much as possible where you can. Don't just go by the "20% of your income" rule. The key is to keep cutting until you can't anymore. If you are financially sound, you just need to maintain where you are.
Tip #2: Be accurate
When you are listing your income and expenses, it is essential that you are accurate. Don't round up or down. In fact, I suggest that you go right down to the penny.
When it comes to your spending, you should track it carefully for at least two months in order to see where you are spending your money. If you leave out the fact that you get a latte every morning on the way to work, you will not have an accurate picture of where your money is going. That is why you can follow your budget, yet not have any money left over at the end of the month.
The majority of budgets fail for the same reasons. With a few tips, you can start your budget off on the right foot.
Tip #1: Look to your spending
The vast majority of consumers cannot simply use a preset budget and succeed. We all have different necessities and wants. While gasoline may be a large expense for my family due to commute times, it may not be a consideration for someone who takes the subway to work. One family eats differently than another.
The key is to look at what you are currently spending and find ways to change it. Look to cutting back as much as possible where you can. Don't just go by the "20% of your income" rule. The key is to keep cutting until you can't anymore. If you are financially sound, you just need to maintain where you are.
Tip #2: Be accurate
When you are listing your income and expenses, it is essential that you are accurate. Don't round up or down. In fact, I suggest that you go right down to the penny.
When it comes to your spending, you should track it carefully for at least two months in order to see where you are spending your money. If you leave out the fact that you get a latte every morning on the way to work, you will not have an accurate picture of where your money is going. That is why you can follow your budget, yet not have any money left over at the end of the month.
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