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How to Plan for Future Expenses and Emergencies

Presented By: EJ Cooksey | Wednesday, April 23, 2008 | , , , | Comments

The passbook is the traditional document to keep track of earnings in a savings accountImage via WikipediaIn today's economy, many people are living from one paycheck to the next. They are never quite sure if they will have enough money to cover all their bills. This can make planning for future expense or emergencies extremely difficult. If you are not prepared for these big expenses that pop up from time to time, it can be a very stressful event.

The following tips on how to plan for your future and save money for the little and the big expenses should make your life much less stressful.

Step 1: Create a personal budget.

You can call it a spending plan if you prefer. It gives you control over your spending and cash flow, and helps you know where you can cut back and save money.

Step 2: Create spending goals.

How much you spend on the majority of expenses in your life is up to you. You will begin to control your money in a positive way when you create a spending goal.

Step 3: Create savings goals.

Include both short-term and long-term savings goals. Short-term goals give you more immediate satisfaction, like saving for a new sofa or a vacation. Long-term goals like a new house or retirement are important too. Set up timelines and planned amounts to save each month for every goal. For example, if you’re saving for a family vacation your goal may be to put away "X" amount of dollars every month for "X" amount of months to reach that goal.

Step 4:
Create a separate savings account for your each of your goals.

If your savings and your checking are linked, then you run the risk of using your savings to pay for bills or things you want to buy for immediate satisfaction.

Step 5: Put away money for emergencies.

Experts advise to have a minimum of six months salary set aside just in case. This is particularly important in today's economy where people can get laid off from their jobs, or businesses can go under without notice. And if you’re self-employed, an emergency savings account is particularly important.

With the right planning and a good personal budget, saving money can be a very positive and empowering experience. After all, isn't it worth your time and effort to make your future more secure, to provide a good financial role model for your children, and to enjoy the fruits of your labor.

Recommended: Guide to Family Budgeting

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