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.
In Summary
One of the mistakes people make when trying to get their finances under
control is not having an emergency fund on their savings account. The
problem is that if you don't have money set aside for those unavoidable
bills, you inevitably end up adding to your credit card balance to
cover the difference.
The bottom line is to start today. It may be discouraging at first if
you find that you don't have enough money to fully fund your emergency
fund, but you'll begin to succeed the minute you start the process.
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