Why live on a budget?

[Liss]

I’m a Dave Ramsey follower and he recommends a $1000 emergency fund

for just such an emergency. As long as your bills are up to date, or

even if your robbing Peter to pay Paul each month, you must find

every penny to build an emergency fund. Especially if you are living

in the paycheck to paycheck situation, there are more chances Murphy

will make a visit to you. Once you have that emergency fund in

place, than you can modify your budget to accomodate a “vehicle

repair/emergency” category and build it to what you think is

appropriate. For example my deductable is $500 with reimbursed car

rental, at $50/day allow for a week (7 days = $350) with towing at

$50, so we are looking at $900. Create that category and fund it to

$900+, but always have a $1000 emergency fund. That can also cover

Emergency Room copays, accidentally breaking your front room window,

emergency trip to see sick/dying family, etc.

Catherine

— In Budget101_@yahoogroups.com, “trisha” wrote:

>

> Hi,

> I think that article is really correct. I think that having my

car

> break down on me (the morning of new years eve).. and realizing

that

> already for towing and diagonistics I am past $130 dollars.. It is

> very important to have a budget that includes a category for

> emergencies. The only big question I would have.. is what

percentage

> of a paycheck should go into that category?

> ~Trisha

>

>

>

>

>

>

>

> — In Budget101_@yahoogroups.com, “Liss” wrote:

> >

> > Why live on a budget?

> > By Shelly K. Schwartz

> >

> > 4 reasons to budget

> > 1. Help control debt

> > 2. Earn cheaper rates

> > 3. Improve relationships

> > 4. Save more money

> >

> > If you’re like most Americans, your monthly income never goes far

> > enough. After shelling out for house payments and groceries, it

> seems

> > there’s little leftover for things that matter most to you —

> weekly

> > dinners out, orchestra-row theater seats, a college savings plan

> for

> > your kids.

> >

> >

> >

> > Hate to break it to you, but it’s not your salary that’s to

blame.

> > According to financial experts, it’s a pattern of poor spending

> > choices.

> >

> > “When my clients sit down and really look at where their money is

> > going, oftentimes they are shocked to find it has nothing to do

> with

> > what’s really important to them,” says Martin Siesta, a certified

> > financial planner for Compass Wealth Management in Maplewood,

> > N.J. “Five dollars a day on Starbucks, for example, is a big

number

> > when you multiply it by 360. That takes away from things you may

> have

> > been struggling to attain.”

> >

> > Life’s little extras are well within reach for those who know how

> to

> > budget.

> >

> > By establishing reasonable spending limits and sticking to them,

> the

> > average consumer can do far more with less — without sacrificing

> > daily conveniences, said Jim Tehan, a spokesman for the Myvesta

> > Foundation, a self-help consumer education Web site.

> >

> > “Budgeting is all about controlling your finances instead of

> letting

> > your finances control you,” Tehan says. “That element of control

is

> > going to save you money in the long run.”

> >

> > Controlling debt

> > Financial mismanagement makes consumers more vulnerable to

> > overspending, which results in lower savings and higher credit

card

> > debt.

> >

> > Myvesta’s 2005 annual Credit Card Survey, reports the average

> > American carries $2,328 in credit card debt, spread out across

2.9

> > cards. With interest rates at or above 18 percent for most cards,

> > that gets expensive. For example, a $5,000 balance on a credit

card

> > with 18 percent interest would cost you more than $8,000 to pay

off

> > if you made only the minimum payments (4 percent).

> >

> > “The amount of money you wind up spending just servicing debt

> through

> > credit card interest could be extra money you could apply towards

> > something else,” Siesta says, adding that following a monthly

> budget

> > can help you both pay down existing debt and prevent impulse

> spending

> > to begin with.

> >

> > Cheaper rates

> > Another upside to life on a budget is that it forces you to

become

> > organized. That, in turn, helps you avoid late payment penalties

> and

> > improves your credit score. Lenders use your credit score to

> > determine how much they should charge you for auto and mortgage

> > loans. It also can affect how much you pay for auto and

homeowners

> > insurance.

> >

> > Improve your relationship

> > A less obvious benefit of budgeting is the positive effect it can

> > have on relationships. According to Siesta, sitting down with

your

> > significant other to discuss financial goals helps prevent money

> > disputes down the road. It also provides a rare opportunity to

> define

> > your own spending philosophies. “Money is a huge source of stress

> for

> > many couples,” he said. “The mere act of discussing your finances

> > with a spouse or significant other really does help create better

> > understanding and better relationships.”

> >

> > Saving for the future

> > Finally, learning to live within your means can help you get

ahead.

> > By allocating a portion of your monthly budget towards savings,

you

> > can simultaneously build a retirement nest egg for your future

and

> a

> > financial safety net for short-term emergencies, in case you or

> your

> > spouse lose a job or suddenly fall ill.

> >

> > “Budgets create financial security, which gives you the ability

to

> > withstand the financial surprises that life throws your way,”

Tehan

> > said.

> >

> > Budgets are all about financial freedom. Without a plan for

saving

> > and spending, you’ll never make the most of your income — no

> matter

> > how much money you earn.

> >

> > “Budgets are very empowering,” Siesta says.

> >

> > “They don’t lead you away from something. They lead you toward

your

> > financial goals.”

> > By Shelly K. Schwartz

> >

>

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