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This is one of
most important steps in budgeting process. The one step that most of us forget to do. The biggest budget busters are these "unexpected expenses". They’re not really unexpected. Most of us just have a tendency to treat them as if they are unexpected. You don’t plan for them. Consequently you will not be financially prepared when they need to be taken care of. You know that car and home require some level of maintenance, but do you actually have a plan to pay for that expense? Or, when hot water heater goes up, will you be forced to resort to help of credit card companies. This is what they hope you will do. Of course property taxes have to be paid. Will you have payment when it is due?
To reduce debt and maintain a successful budget you have to plan for these "variables". If not, you will inevitably use credit cards to bail out and you’ll be defeating yourself. The variable expense allowance in your monthly budget will allow you save for these expenses and will be your defense against creating more debt. This is an essential step in building financial security, investing in yourself, and remaining debt free.
~ Set a reasonable amount for your monthly savings allowance. This will be an emergency fund that can bail you out in case of tragic circumstances such as a serious illness or unemployment. Start with 10-15 % of your income and cut back to as little as 5% if you need to balance budget. But, do save something! Anything is better than nothing. If you have to start small, as your finances improve, you should increase your savings allowance to reach at least 10% of your income.
Of course, once you have all of these figures in place you may find that you don’t have enough money to cover all expenses. You not alone. I was amazed at how much more I was spending than I was earning. It finally made sense to me why I couldn’t get ahead. Why my debt kept increasing no matter how hard I tried to budget. This is when you have to start eliminating unnecessary spending, trimming down expenses by using some money saving strategies, or possibly considering an extra income.
It isn’t always an easy process. It depends on how much of your spending is "unnecessary", how much you’re paying out for debt, and how much you want to be free from debt and financially independent.
One things certain, if you take control of your money, and are committed to living debt free, you will find success. If you just keep doing what you’re doing, things will not change, but will inevitably get worse. You will continue to invest in credit card companies, spending money that you don’t actually have, and don’t have a plan to pay back.
So start with a good spending plan that cuts out unnecessary spending, reduces monthly bills and expenses to bare minimum, and eliminates credit card use. Save money in every area of your budget. Remember, $10 a month doesn’t sound like a lot. But, a savings of $10 per month is $120 per year that you can apply somewhere else in budget.
Every dollar you free up helps bring budget into balance. Helps you live within your means. Don’t spend more than you have. It doesn’t get any more elementary than that!
Good Luck and Success! Live Debt Free to Be Free. You Deserve It!
Cheryl Johnson is a mother of four helping herself and others become and stay debt free. Publisher of Simple Debt Free Living- A self-help plan, ideas, and resources for debt reduction, personal budgeting, frugal living, and extra income opportunities
