subject: A Penny Saved Is A Penny Earned - Budget To Include Savings [print this page] When you get to the bottom line of your budget, are left with pocket lint? After the bills are paid and the groceries are bought, there seems to be nothing left to even consider an emergency savings fund. It's hard to give up food or a snug house for some hypothetical emergency. You can't imagine what your budget will look like if you start sticking money away for some unforeseen future. But, I guarantee, that without a savings plan, your budget won't matter once you get hit, and you will, with an emergency.
You are not alone. If your budget looks like most household budgets, you don't have any money left after payday. If you have a few pennies left, you'll buy some groceries with it or pay a little extra on a bill. Why would you even consider putting those extra pennies away in a savings account? Why shouldn't you pay a little extra toward a bill or buy something you need with the extra money? You're also wondering how, even if you wanted to, you would be able to stick a few dollars aside. Well, there are some good reasons why and some hard decisions to make as to how.
1) Why should our family have an emergency savings account? It's great when your budget covers all your expenses and your life goes as planned. Unfortunately, life rarely moves along as smoothly as planned. Your child gets sick and you are looking at a $1000 medical bill strung out in installments at 20% interest. Or your car breaks down and now you have no way to get to work unless you can come up with $800 for repairs. Either way, your budget has just hit the skids. You'll find it necessary to start missing other payments and borrowing from high interest credit cards to make ends meet. This starts the ever downward spiral of late fees and overage charges. Now, your emergency is destroying your budget and all your best laid plans are for naught. One emergency expenditure can be devastating to your family's well-being.
2) How can my family budget possibly include a savings plan? You need to put savings first, that's how. It's difficult, and sometimes painful, to realize that without taking a percentage right off the top of your take-home pay, you never will grow a savings fund. We can always find ways to spend money if we have it, so removing it from our budget makes sense. Once you deduct a percentage to save, change your net income to reflect your new take-home pay. Then, subtract your fixed expenses like rent, mortgage, heat, lights, insurance, and the like. Look at what you have left and estimate how much of that money you'll need for groceries, gas, clothing, and other flexible expenses. Adjust and re-adjust until you're comfortable with the money needed to live. But, leave the savings alone. See if you can't get through your first few months with the new scaled-back budget. It might hurt a little, but not as much as it would if you were faced with an emergency and no way out.
It's true that many families are finding it difficult even to pay bills and buy necessities, let alone save some money, too. If this is your situation, you may need to rethink your entire lifestyle. Your family's well-being cannot survive without a savings plan, that fact has already been established. In this case, there are some tough decisions to make. You have two options to consider. You need to spend less money, earn more money, and possibly both. Living the lifestyle you currently live, can you put money aside in savings? Do you bring in enough money to put some of it in an emergency savings account? If not, you need to change something.
Look carefully, and critically, at your lifestyle. Have you driven through a fast food place? Have you bought a designer coffee lately? Are you still shopping for clothes at the mall? If these old habits are still a part of your life, you need to re-examine your priorities and make some changes. Your new life will include consignment shops, and thrift and cut-rate stores. You'll take your kids to the library instead of the book stores. You'll recycle your clothes from season to season instead of buying new. You'll cook at home and cook frugally, using beans once or twice a week instead of meat. You will turn a frugal eye to everything you buy.
Perhaps you need to earn more money. This is a difficult option because many families are already working two jobs. Is there an opportunity that you have over-looked? Networking with other people in your community may lead you somewhere that you hadn't known was possible. Is there something you can do at home after work that would allow you to bring in some needed cash? No one said this was going to be easy, but you have to consider your financial situation and make an effort to help your family survive.
If your family budget is nothing more than an outline of money in and money out, then your budget is not complete. Your budget is a tool to establish financial security, not just a way to make sure the bills get paid on time. It's true that you may need to sacrifice some things you've become attached to. You will need to re-assess your old habits and establish some new, frugal habits. Your family's well-being depends on having the means to handle any emergency that occurs. Once you and your family see your emergency fund start growing, I guarantee you'll start to relax and look forward to a great future.
by: Susanne Myers..
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