Your Budget Is Not Complete Without A Savings Plan | Savings

Your Budget Is Not Complete Without A Savings Plan

by SusanneMyers

I know what you're thinking. A savings plan with my tight budget? Every penny we have is needed for the necessities... you know, like food and shelter. Let's just say it's going to be difficult to ask my family to give up eating in order to put money away in a savings account every month. What will happen to our budget if we start skimming money off to save? To this I respond, "What will happen if you don't"?

Your budget probably looks like a lot of household budgets. The bottom line is a big, fat zero. You've just spent every cent you have on paying the bills and feeding the family. Even if you have a few cents left after payday, you can always use some groceries or other necessities. As long as you're spending your money on practical items, why should you start an emergency savings fund? And, even if it's something that makes sense to you, how on earth can you squeeze more money out of your budget to accomplish this savings plan? We'll set out to convince you of the Why, and then help you create a plan with the How.

1) Why should I put money away for emergencies? Because the emergencies, not your everyday needs, are the things that will break your budget. Consider this; you've developed a good, working budget that gets all your bills paid and feeds your family. Great. You're sailing along just fine until the car breaks down. You're looking at $500 in repairs and don't have the money. Now, how do you get to work? Or your child falls down and breaks an arm. You rush to the emergency room, and $1500 later you are looking at a bill that will have to be paid off in installments with interest attached. Either scenario will destroy your previously perfect budget, which will result in shuffling money around, eventually falling behind in other payments. Now you're facing late charges on your utilities, mortgage, and other necessary monthly payments. You see how taking money to pay for emergencies directly out of your regular budget has a snowballing effect.

2) How do I save money for emergencies? The only real way to ensure that you develop a good safety net is by putting saving at the top of your list. When you start with a flat percentage of your net pay, you will be more likely to save than if you see what's left after everything is budgeted. Your fixed expenses, like your mortgage and utilities, should come next. Then your flexible expenses like groceries, clothing, and the like. You'll need to go over this a few times, but try to stick to the savings amount when making adjustments. Try to focus on cutting the flexible expenses first. This will be difficult at first, but the relief you feel as you watch your savings grow is worth all the sacrifices you make at the grocery or clothing store. When you can pay for an emergency expenditure with cash, and keep your budget intact, you won't even miss that drive-thru lunch or latte.

The hard truth is, many families can barely squeeze the necessities out of their budget. If this is your predicament, it is a difficult situation and you may need to take more drastic measures to reach a solution and start saving. We've already seen that there is no compromising on putting savings first on your family's budget. When your budget is so tight that you can find no room for savings, it leaves you with two options. Spend less money, or make more money. Can you put money in an emergency savings fund given your current lifestyle and with the money you currently bring in each month? Probably not, so something has to change.

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.

As difficult as it is, you may need to increase your income. This is especially hard to accept as so many families are already working two, if not three, jobs already. However, you may not be left with many choices. You need to ask yourself if there is an opportunity for additional income that you've over-looked. Perhaps your circle of friends will supply you with some much needed information. Networking is a great way to discover simple ways to make money at home, after work, on weekends, or evenings. Do you have a knack for crafts, cooking, art, or other talent that you can share for a price? This will take some imagination and energy, but failure is not an option when it comes to your family's finances.

Your family budget is more than an outline of how much to pay each month in order to get your bills paid on time. It's a series of challenges you need to face to gain control of your finances. You may need to make some changes in the way your family lives in order to make your savings plan work. Remind your family that this is a plan for financial freedom. Without an emergency savings plan, your financial freedom may go up in smoke. Start slowly if needed, but start. Having that cushion to protect your family means more than preserving your budget... it could mean saving your family from financial disaster.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

The first order of business for any family's financial freedom is Preparing a Family Budget and the second most important item is simply Sticking To Your Family Budget. Building your family's safety net depends on these two things, and so does your peace of mind.