unexpected car repairs, quarterly insurance
payments or those darned property
find you hard pressed to squeeze one more
dollar out of an already stretched monthly
budget? Or do you usually end up reaching
for the plastic
in your wallet to make up the difference?
Those inevitable expenses can put less
stress on your bank balance -- and
your mind -- if you learn
to expect them and save in advance.
Too often, irregular occurring expenses
get left out of our financial
equation. Our income stretches to cover
the regular monthly expenses and the remainder
trickles away toward little things like
the morning espresso or lunches out or
a dozen other daily splurges. We choose
not to think about the brakes that are
getting spongy or the plumbing that's
beginning to make strange noises. And
we end up riding a financial roller coaster,
never knowing when the next crisis will
throw us for a loop.
and saving for those events can help prevent
an ordinary life
from turning into a crisis and can also
cut down dependence on credit
cards. Not having savings is a major
reason people get into debt
-- event when they don't have problems
controlling their spending.
Anti-Emergency Fund is the way to
anticipate and save for those irregular
events that are anything but unexpected.
The Anti-Emergency Fund is the foundation
of the three-part savings plan
we'll be discussing in this and coming
issues of "MoneySmart News"
. With a little advanced planning, a broken
water heater, a high winter heating bill
or the family vacation don't have to result
in financial emergencies. An Anti- Emergency
account helps in saving for those variable
expenses, both expected and unexpected,
that inevitably occur.
people call this their "emergency
fund," but it's really a savings
fund that helps you prevent financial
No, you can't predict when your car is
going to break down, but you can predict
that it will occasionally need maintenance
and repairs and set aside a little money
in advance for those events.
are some steps to help you get started
on your Anti-Emergency Fund:
your irregular expenses.
Take an inventory of those variable expenses
that occur throughout the year. Looking
back at checking account registers and
credit card statements can help you do
this. Some examples of these include property
taxes, insurance premiums, vacations,
car tune-ups, holidays and birthdays.
List as many of your non-monthly expenses
as you can remember.
the anticipated amounts on the calendar.
In many cases, you will know when the
expenses are due to occur. In others,
you won't. But you know that sooner or
later a car will have problems or an appliance
will break down. Try to anticipate these
expenses and list them somewhat earlier
than you actually expect them to come
up. Be sure to update your calendar as
you discover more expenses.
money in your monthly spending plan for
If your car insurance, for example, is
due in May, set aside a small portion
each month starting in February. That
way, when May rolls around you can transfer
the expense to your spending plan and
have money available to pay it. Setting
aside even a few
dollars each month for foreseeable
expenses can make it easier to manage
your money throughout the year.
You may think you don't have any "extra"
money during the month to set aside, but
repairing your car or paying your insurance
are not optional expenses. By setting
aside small amounts ahead of time, you're
avoiding larger money woes ahead. So you
may need to find ways to reduce your regular
monthly spending. By tracking your expenses,
you may discover areas where you can trim
your monthly spending with only small
sacrifices. Costs of twice-weekly trips
to the drive through or a professional
manicure can add up quickly over a month.
The important thing is to start
today. It may be discouraging at first
if you find that you don't have enough
money to fully fund your Anti- Emergency
Fund, but you'll begin to succeed
the minute you start the process. Small
amounts of savings
add up quickly and start compounding immediately!
of the mistakes
people make when trying to get their finances
under control is not having a savings
account. They may reason that
it's better to put money toward reducing
credit card debt at 18 percent interest
than to toss it into a low-interest regular
savings account. The problem is that if
you don't have money set aside for those
unavoidable bills, you inevitably end
up adding to your credit card balance
to cover the difference.
your debt means agreeing not to incur
new charges and to begin paying down what
you owe. A savings account is a key element
in making that happen -- and in improving
your financial freedom!
more articles by Cindy Morus
more articles about Personal Finance
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