An ounce of preparation is worth more than a pound of cure. Your grandpa might throw around old sayings like that all the time, but in all honesty, this one actually is true. When tending to any unexpected financial curve balls thrown at you, this saying rings true. By learning how to organize your budget properly, you can be ready for many different kinds of financial emergencies that may pop up at you at the absolute worst possible moment.
Kinds of Financial Emergencies You Should Plan For
When planning ahead, there is more than one kind of financial emergency you should consider when organizing your budget. Life tends to chuck any number of unexpected curve balls at us, and they always seem to come at the worst possible moment. That being said, it is best if you prepare yourself for the likes of:
- Property tax
- Christmas gifts
- Car repairs
- Birthday presents
- Vision bills
- Dental bills
- Hospital visit
- House/tenant insurance
- Car insurance
- Home repairs
- Traveling to, and buying a gift for, a close friend or family member’s wedding
- Kid related fees (music lessons, school fees, sports, etc.)
How to Organize Your Budget So You Are Ready for a Financial Emergency
It is not as difficult as you may have thought to prepare yourself for the absolute worst that could happen to your pocket book. There are 5 easy steps for you to follow so that you are ready for a financial emergency.
By following them, you will be in a lot better shape to deal with financial calamities you would have otherwise gotten knocked down by. These steps include:
- Identifying Unexpected Expenses
By taking some time to write down some potential expenses that might come your way (such as the ones we listed above), you will have a better idea of what kind of bill(s) you may end up having to foot. You can then prepare for having to pay that amount and not have to panic about coming up with money last minute, because you saved up for that expense.
- Look at Past Irregular Expenses
Make sure you have a look at your calendar from the past year, your credit card statements, and your bank statements. When you look through them, check for any irregular expenses. When you see what those expenses might be, jot down what you paid and when you had to pay them. Keeping in mind what you have paid in the past, will leave you better prepared when you need to pay such expenses again somewhere down the line.
- Tally Up All Expenses
Tally up unexpected expenses and the amount of your regular expenses. Afterward, you will want to divide by the number of pay checks you get every year. An example of this would be if your irregular and periodic expenses total up to $2,500 for the entire year. Take that amount and divide by 26, if you are paid on a bi-weekly basis. You will then want to set this amount, which is $96, aside into an account that is separate so that you will have the money you need when you need it.
- Revise Your Budget
You may end up finding it to be difficult to set aside $100 every month at the start of your budget adherence, so you will want to work your way up to that amount over a pre-determined period of time. While you are doing this, look for ways to decrease your other expenses. You can star off by saving $25 from every pay check. Over time you could bump it up to $50, $75, and then $100. Of course, you can do this in whatever kinds of increments will work best for you.
- Set Up an Organized Money Management System
It will be a great deal easier for you to save the amount of money that you would like to save by making the entire process automated. By setting up automatic electronic transfers, you do not have to think about or go through the effort of actively setting aside and reallocating the money you would like to save to a different account. Additionally, by making things automatic you will be keeping the money safe from yourself. It can be tempting to just take that money and spend it on yourself instead of saving it for emergencies.