Savings Plan For Emergencies - Essential Part Of Your Budget
February 11, 2009 – 8:44 am“I can’t possibly start a savings account when every penny we have goes toward necessities like food, clothing, and housing.” Trust me, I know the dilemma. You create a budget for your household and realize you have no money left over at the end of the month. How can you possibly put money away in an emergency fund when you need it for essentials? Let’s start by looking at the WHY, then move on to the HOW.
WHY should I put money away for emergencies? Consider this; you’ve developed a good, working budget that gets all your bills paid and feeds your family. You’re doing just fine until the car breaks down. You’re looking at $400 in repairs and don’t have the money, and now you can’t get to work. Or, say you have an emergency room visit, and now you are saddled with paying off $800 in installments with interest attached. As these additional burdens start to delay making your other monthly payments, you begin facing late charges on your utilities, mortgage, and other necessary monthly payments. You get more and more behind and your budget is history.
HOW do I put money away for emergencies? Put savings at the top of your budget, not at the bottom. Start with a flat percentage of your take-home pay and work it into your budget as the first monthly expense. List all your fixed expenses followed by your flexible expenses. If you see a little cash left, move it back up to savings and re-figure your budget. This budget method may take several attempts, but it’s worth the effort. When there is an emergency, you’ll be able to take care of it.
Your family budget is more than an outline of how you’re going to get your bills paid on time. It’s a plan for financial freedom. Without an emergency savings plan, your financial freedom may go up in smoke. Start saving today and breathe a sigh of relief!