Do you find it hard to squeeze even one more dollar out of a monthly budget that is already tight because of unexpected car repairs, quarterly insurance payments, or medical bills? These are unavoidable costs that can put you in a stressful situation when you need cash to pay for them. But if you plan ahead and save money for emergencies, you will be better able to handle them when they happen.
Like most Americans, you may stretch your income to pay for monthly bills and choose to ignore or not think about things like brakes that are getting soft or plumbing that is making strange noises. And when your brakes wear out or your plumbing breaks, your monthly costs go up.
Planning and saving for these things can help keep a normal life from turning into a crisis and reduce the need to use credit cards. People often get into debt because they don't have any savings.
Here are some steps to help you get started planning for your emergency fund, the "Saving" fund that will help you avoid financial disaster.
1.
Identify your irregular expenses
Look at your credit card statement and checking account registers to find out what kinds of expenses you made that didn't make sense. Taxes, insurance premiums, vacations, car tune-ups, holidays, and birthdays are all examples of these kinds of expenses. Write down on a piece of paper all the costs that you don't pay every month.
2.
Put the amount you expect on the calendar.
For most expenses, like insurance premiums and property taxes, you'll know when they're due. And for things like car repairs and plumbing repairs that you don't know how much they will cost, try to guess and write them down a little before you expect them to come up. Be sure to update your calendar as you discover more expenses.
3.
Plan for your non-monthly costs in your monthly budget.
Plan ahead for your non-monthly expenses by adding them to your monthly budget based on what you know and what you think will happen. For example, if you know that your car insurance is due in May, you could start putting aside a small amount of money in February. When May comes, you can move the cost to your spending plan and have the money to pay for it. Putting away even a small amount of money each month for expected costs can help you avoid bigger money problems in the future.
Sometimes it can be hard to save a little extra money from your monthly income, but remember that things like fixing your car or paying your insurance are necessary costs that you have to pay for sooner or later. So you need to find a way to cut back on your monthly costs so you can save some money for an emergency. You might need to keep track of what you spend and then cut back on things like entertainment, dinners out, and other impulse purchases. The money you save can go into an emergency fund.
In conclusion,
When people try to get their finances in order, one mistake they make is not having an emergency fund in their savings account. The problem is that if you don't save money for those bills you can't avoid, you'll have to put more on your credit card to make up the difference.
The most important thing is to start now. If you don't have enough money to fully fund your emergency fund, it may be discouraging at first, but you'll start making progress as soon as you start the process.
