Why You Need an Emergency Fund for Your Debt Control

Some may question the necessity of an emergency fund in your quest for debt control. After all, is it really necessary? How do you go about it? Does it need to be a huge amount? Here are some ideas and suggestions that should help answer these questions.

Is an Emergency Fund Necessary?

Generally speaking, yes, an emergency fund is necessary. What form it takes can vary, but it is a good idea to have an emergency fund. Such a fund can help you avoid high-interest debt, and it helps reduce stress. After all, life is full of changes - many of them sudden and not good - and having that "cushion" can help you feel ready and calm.

How Do You Go about Creating an Emergency Fund?

First, determine your expenses. Look at three to six months' worth of living costs and count on saving that much in a fund. This can help you keep your standard of living for a time if you lose your job, or it can cover a large expense such as vehicle repair.

Then determine how long it will take you to save that much and how much you have to take out of your paycheck each month to reach that goal.

Once you've determined how much you need to save and how long it will take to save it, it's a good idea to change your mentality to put payments into the emergency fund before you pay for anything else. If you can do it by automatic deduction, go for it - see if you can have a portion of your paycheck taken out and put into a savings account. Otherwise, make it a habit to put money in your savings first and foremost, and then take care of your other expenses after.

What If You Have Low Income?

Even if you have low income, you can set aside something each month. Try saving a percentage of your income, such as 5 or 10 percent. It may take you longer, but it will accumulate.

Does It Have to Be Huge?

In short, no. An emergency fund does not have to be massive - but it certainly should cover unexpected expenses. To determine the size of your fund, consider what sorts of emergencies you'd want covered by the fund. Remember that buying insurance may be a more cost-effective way to guard against emergencies, too - evaluate the scope, likelihood, and potential cost of possible emergencies and this should give you a clearer picture of how large your fund needs to be.

Keys to a Successful Family Budget

Creating a family budget is within everyone's reach, but creating a successful one requires some particular methods. Here are some tips to help you create a successful family budget.

Get Everyone on Board

The more inclusive your budget is, the more likely it is to work well for your family. Include every family member who is old enough to understand. A budget affects everyone, and it's a good idea to listen to input from other members of the family.

Leave Room for Luxuries

Some budgets are so tight that it may seem there's no room for any luxury. But if you get a bit creative about what constitutes a luxury, you will probably find you can in fact afford some kind of privilege or luxury. It could be something like buying your favorite brand name item at the store instead of settling for the store brand, or maybe buying fresh fish instead of frozen once a month. Maybe ordering a pizza or Chinese food is a luxury for your family that you can include in your budget.

If you are budgeting with more money, your luxury could be a family vacation or new piece of electronic equipment. The point is to include some kind of luxury in your budget. This helps keep family members motivated and makes the budget easier to deal with.

Get a Good Estimation

To do this, it's a good idea to take your last three months' worth of income and create an average. When in doubt, round down so that surprises will be more likely to be on the plus side. The same is true for expenses - include at least three months of expenses to get a true picture.

Be Patient

It takes a few months for a budget to sort itself out and become habit. There will be bugs that need to be worked out. Understanding this can help you stick with it as it needs tweaking and adjusting.

Software

For some, using software to lay out the family budget can be very helpful. Software that is designed for the purpose may make creating the budget easier.

Combine  

As you look at the things that cost you money, remember gas and miles on your car. Combining errands is something most people try to do; but there might be some other combinations that you hadn't thought of. For example, visit out-of-town family members during your vacation.

Distinguish between Optional and Necessary Spending

This distinction is harder to make for some people than others, and it's tougher in some family dynamics than others. What one person thinks of as a "necessity" might be looked at as a luxury by someone else. If you're in doubt, check budget formats and accepted principles in this regard that come from a third party.

Pay off Debts

It's unpleasant, but paying off debts needs to be high on the priority list for your family budget. The sooner they're paid off, the sooner you'll have more money left over!

Creative Budgeting - Customize Your Budget to Fit Your Family

Your family budget does not necessarily have to fit a template - even if you do use a template, you can customize it. A budget that really fits your style and family dynamic tends to be a lot easier to stick with, and can even be fun! Here are some tips for making a creative, customized family budget.

It's Your Budget

Get your whole family to participate in creating the budget to make it really yours. Create common goals and brainstorm for fun and creative budgeting ideas.

Cookouts

The great American cookout is a great way to have an "outing" while saving money. If you grill seasonal garden vegetables, it's an even bigger money saver. Get creative - you can grill inexpensive, "ordinary" foods and make them seem like a treat. For example, mix up some flat bread dough and cook it on the grill. You can even do pizza on the grill!

Go "Shopping" for What You Don't Need

This can be fun as a family. When you're out running errands or at the mall, make a point of pointing out all the useless things you see that you don't need. Some people can have a lot of fun with this - they find the craziest looking clothes, for instance, and laugh about how much they don't need them and how much they're saving. It's fun, but it also teaches your family some important lessons about needs versus wants.

Creative Savings - a New Take on the "Swear Jar"

Have you heard of a "swear jar"? Some families who are trying to improve their language will institute a swear jar. Any family member who swears has to put a quarter into the jar. Get creative with your family - is there something your family would like to improve on that could use a "swear jar"? Here are some ideas:

* Every time your child talks back he or she has to put a quarter in the jar.

* Playing video games, watching television, and other entertainment media "costs" 50 cents for every half an hour.

* Family members must pay a quarter each time they don't put away their shoes, toys, or whatever item always seems to be left on the floor each day.

* Complaining about dinner will cost family members 50 cents each.

Another method is simply never to spend change. When you pay cash for something, always use paper money - if the total is $5.26, give the clerk $6. Then put this change into the jar. You'll be amazed at how this can accumulate over the year, especially if you use cash often.

DIY Videos

Make use of all those online tutorials to fix minor problems around the house. Try typing your problem into your search engine and look for tutorials. It's amazing how much information is on the internet, even for solving obscure problems.

Practical Steps to Getting Started on a Family Budget

Are you ready to get started on a family budget? Are you overwhelmed? It can seem complicated at first - how do you categorize everything? What about expenses that fluctuate or aren't monthly? The best thing to do is take a step back and look at some practical steps toward formulating your family budget. Here are some tips.

Estimates and Actuals, not Ideals

Remember that your budget is a tool, not a dream machine. Goals are important, but a family budget should first focus on the numbers you're dealing with. That's the basic first step. Once you have a grasp on that, you can begin a bit more idealizing, such as saving for vacations, desired items, etc.

Start with Your Net Income

First, figure out your net income for each month. This means your income minus taxes, insurance, 401K deductions, and so forth. If you are self-employed, subtract estimated taxes, insurance costs, retirement account savings, etc. At this point, you just need numbers.

Expenses - Keep Categories General

Next, figure out your monthly expenses. If they vary, figure out an average by looking at the last three to six months' worth of expenses. For instance, if your electric bill was $150 last month, $140 the month before, and $175 the month before that, then you can estimate a monthly expense of around $155 for electricity. Alternatively, you could take the highest amount, $175, and go with that.

It's a good idea to keep your categories as general as possible while still preserving clarity. Otherwise, you might get confused or overwhelmed by all the "hair splitting." For example, instead of having "food, paper products, drug items, etc." as categories, you can lump all those expenses under "groceries." Items like "pet supplies" can be their own category, but you might want to include vet bills in that category. Here are some suggestions for categories:

* Charitable giving
* Payment off debt
* Home (mortgage, rent, property tax, insurance, repairs, etc.)
* Vehicle
* Utilities
* Health Care
* Birthday and Christmas gifts
* Cushion (this is money set aside to offset surprises, mistakes, or unexpected expenditures)
* Personal (eating out, hair appointments, etc.)

Stop and Look

At this point, stop and take a look at what you've got so far. Are your expenses greater than your income? It's time to cut back significantly, or find another source of income (or both).

Actual Expenses

So far, you have two columns - income and estimated expenses. Now you need to add another column: actual expenses. Keep track of the real numbers each week over the next month and see how much/if they differ.

Now you're well on your way to a workable budget!

Budgeting Basics for your Debt Control

Budget Basics


Have you been talking about a family budget, but aren't sure where to start? Sometimes it's good to start with the basics, such as the basic outline for a budget and the categories you want to include. Here are some tips to help you formulate a simple family budget.

Income

The first place to start in the outline of your budget is with your income. There will be some estimating here, no doubt; but make sure it's estimation, not dreaming, say experts. The income area of your budget is not the place to write down ideals. Simply take a look at your net income over the last three months and estimate an average monthly income. Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.

Expenses

Your next category should be expenses. It's good to include enough detail that you have a grasp on things, but splitting your expenses into dozens of little categories will probably only frustrate you. Try to make your categories fairy general - "entertainment," for example, is a more general category than "computer games, movies, cable, and DVDs" listed as separate categories. There will probably be more estimation here than in the income category.

As you break down your expenses into understandable categories and numbers, remember that charitable giving or any giving away of money should be also listed as an expenditure.

Actual Expenses

Estimation gives way to "real" numbers when you write down your actual expenses during the month. This is the last section of your budget plan. Keep a running tally of your expenses for several months, and then look at where you are.

Some Basic Principles

In budgeting, there are some principles that are considered basic. Here are some of them.

* Distinguish between wants and needs. This can be a hard one, but it's vital for a budget to function properly. Beware of convincing yourself that a want is a need when it isn't - you may just be trying to find an excuse to buy the item. Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!

* Expenses should not exceed income. You may find yourself surprised the first time you do a budget and discover that you actually don't make enough money to cover your expenses. If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.

Basics on Budgeting

Have you been talking about a family budget, but aren't sure where to start? Sometimes it's good to start with the basics, such as the basic outline for a budget and the categories you want to include. Here are some tips to help you formulate a simple family budget.

Income

The first place to start in the outline of your budget is with your income. There will be some estimating here, no doubt; but make sure it's estimation, not dreaming, say experts. The income area of your budget is not the place to write down ideals. Simply take a look at your net income over the last three months and estimate an average monthly income. Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.

Expenses

Your next category should be expenses. It's good to include enough detail that you have a grasp on things, but splitting your expenses into dozens of little categories will probably only frustrate you. Try to make your categories fairy general - "entertainment," for example, is a more general category than "computer games, movies, cable, and DVDs" listed as separate categories. There will probably be more estimation here than in the income category.

As you break down your expenses into understandable categories and numbers, remember that charitable giving or any giving away of money should be also listed as an expenditure.

Actual Expenses

Estimation gives way to "real" numbers when you write down your actual expenses during the month. This is the last section of your budget plan. Keep a running tally of your expenses for several months, and then look at where you are.

Some Basic Principles

In budgeting, there are some principles that are considered basic. Here are some of them.

* Distinguish between wants and needs. This can be a hard one, but it's vital for a budget to function properly. Beware of convincing yourself that a want is a need when it isn't - you may just be trying to find an excuse to buy the item. Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!

* Expenses should not exceed income. You may find yourself surprised the first time you do a budget and discover that you actually don't make enough money to cover your expenses. If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.