Saturday, March 15, 2014

A few more budget tips and what is an emergency fund?

By now, you've written your budget and hopefully had your first "cash only" grocery store trip!  Are you still struggling?  Feeling deprived because you actually have to think about what you are spending money on instead of just going to by whatever, whenever?  If so, you are on the right track.  I promise it will NOT always feel like this!

Here are some additional tips that may make budgeting a bit more pleasant!

1.  You must budget for every single dollar that comes into your house!  Every dollar must have a place or it will vanish into thin air.  Don't believe me?  How many times have you gone shopping only to come home and really freak out when you are adding up your receipts?  Have you ever had $50 in cash on you only to come home with next to nothing?  Have you ever looked in your purse or wallet and actually asked yourself where your money went?  THIS is why you must assign every dollar to a category!

2.  Allot yourself and your significant other a small amount of money each pay to spend however you wish.  Obviously, if your budget is super tight, this might only be $5 per pay!  It's not the amount that matters, it's the freedom of having a little bit of cash to splurge!  This will help you feel less deprived on a budget!  I use my "free money" for magazines or eating out with the girls!

3.  We have already talked about groceries being a "cash only" budget category.  You need to think of some other categories that you have trouble with that could go to a cash only budget.  In my house, I take out cash for groceries, pet expenses, date night, and free money every pay.  Each chunk of money is put in their separate places and only spent on the category it is meant for!  I know you don't want me to throw this out there, but if your budget is really tight, you don't get a date night budget.  Am I saying you can't have a date night?  Absolutely NOT!  Date night is very important to healthy relationships.  What I am saying is that until your budget has some extra freed up, your date nights need to be at home and simple.  Movie & popcorn, walks, etc.  Have young kids?  See if you and another couple can do some overnight babysitting for each other to give both couples much needed alone time!

4.  Make it a game!  When I first started my budget, I kept in constant competition with myself to lower the categories I could control!  Seeing it as a contest will help put you in a positive mind set and help you reach your goals.

5.  Finding some extra money in your budget?  How about starting a gift category? Or auto maintenance fund?  Home repairs?

***What happens on the rare occasion where you actually have money left over and all your categories are sufficiently funded?  Start your emergency fund of course!  A what??

An emergency fund is exactly what it sounds like, a pot of money set aside for emergency purposes only and you should start this even if you currently have credit card debt!  (Just make sure you are paying your minimum payments while pulling this together!)   Stay with me on this!  How many times has an unexpected expense made you lose your mind and filled you with panic?  You know, the broken down car, the broken furnace, etc?  Do you know most families have at least one such emergency each year?  And what happens in your life when one of these unexpected events occurs?  Panic?  Trying to figure out which bill you won't pay this month to free up the needed money?  Dropping by your local cash-advance store?  Borrowing from family?  Using credit cards that are already screaming for mercy?

Think of the same things going wrong, but now imagine you have $500 or $1000 in quickly accessible cash just waiting to handle this emergency for you and save you stress!  Think of the difference this would make for your personal well being and sense of security!  That is A LOT of money!   How do you get that money??

1.  Sell things you are not using.  In the day of Facebook Auctions, ebay, Craigslist and consignment shops, this is an easy task!  A side perk of getting rid of unused things is that is clears clutter out of your house too!

2.  Remember that $10 you had left at the end of the money after your bought groceries?  Put it in your emergency fund!

3.  Throw your loose change in a jug and watch it pile up quickly!

Great!  You managed to get $100 just this week!  Now what?  Save it for an EMERGENCY!  Do NOT touch it for anything that is not truly an emergency!  Seriously, this will get very tempting!  It's hard to have $100 or $500 just sitting there doing nothing.  But that's the point!  An emergency fund needs to be where you can get to it NOW, but where you won't completely blow it!  Some financial experts recommend setting up a savings account with ATM only access at a bank other than the bank that has your checking so you will not be tempted to transfer it to your checking!

Having my emergency fund saved my sanity when the catalytic converter went out in the van unexpectedly!  It saved me again when a few weeks after that converter went out (and the day before we were leaving for vacation), the radiator busted!  I was able to fix both without skipping a beat and used the leftover cash when we got back from vacation to help rebuild the fund!  (More on when and how you get to go on vacation later this year!)

Keep plugging away at socking away a full $1000 emergency fund.  Even adding $1 is progress!  It will take time!  It will be very hard to stay out of it, but you MUST!  You only get to spend this money in the case of a true emergency!  Eating out, buying gifts, getting a mani/pedi,  or going on vacation are NOT emergencies!

I know it may seem impossible now.  I remember feeling like it might has well be a million dollars!   Keep adding what you can, no matter how small the amount is!  Once you get your first $100, you will start to relax a little.  As it grows, you will feel calmer and calmer.  You still will need to stay on top of your budget and keep your paws out of this emergency fund money, but there is a sense of peace and calm that comes with having this stash that I cannot even begin to describe and I cannot wait for you to feel that too!

Keep pushing!  YOU GOT THIS!  I have faith in you!!