5 Money Disasters A Budget Will Make No Big Deal
Most days, you feel pretty good about your money. But every now and then, worry creeps in. What if something goes wrong?
We’ve got just the thing to bring you peace of mind.
These fail-proof strategies can help you survive five common money disasters.
Disaster #1: Your Car Goes Kaput
Your car does a great job of getting you from point A to point B. But do you ever find yourself white-knuckling it around town, afraid a breakdown will leave you and your wallet stranded?
Before you tackle any other money goals, throw $1,000 into a starter emergency fund. That way, if your alternator goes out on you, you won’t be scrambling to scrape up $500 to fix it.
A thousand bucks might sound like a big chunk of change. But you’d be surprised at how quickly it comes together when you put your mind—and your budget—to it. Why not try a 50/50 split?
First, review your budget. Can you slash $500 in spending over the next two months? That’s $250 each month. It might mean choosing leftovers and brown-bag lunches instead of restaurants for a while, but it’s worth the temporary sacrifice.
Then, work hard to bring in the other $500. Sell stuff you don’t need or shovel neighbors’ sidewalks. Whatever it takes to get to your goal.
Disaster #2: Your Home Needs a Big Fix
Picture it: You come home from work and find your basement filled with water. Thanks to a busted water heater, you’re looking at $3,000 in repair and cleanup. Not exactly a relaxing way to end your day.
If you own a home, you’ve probably come face to face with surprise expenses at one time or another. Maybe your heater bit the dust on the coldest night of the year or your roof sprang a leak during the last rainstorm. Whatever the case, one thing’s for sure: Home repairs don’t come cheap.
So how do you keep impromptu home repairs from soaking your budget? By beefing up your emergency fund once you’re out of debt. Three to six months’ worth of expenses in the bank should do the trick. If you spend $3,000 a month on a regular basis, plan on saving $9,000–18,000 for rainy days.
Disaster #3: You’re Afraid You’ll Run Out of Money in Retirement
The truth is, retirement isn’t really an emergency. But lots of people treat it like one and panic in the glow of their golden years.
The good news is you have everything you need right now to create the life you want later. You get to tell your money where to go each and every month. If you want to retire in style, all you have to do is plan for it.
We recommend investing 15% of your income toward retirement because it’s enough to build a bright future without cramping your style today. If you bring home $5,000 a month and contribute $750 toward retirement, you could retire with $970,000 to $1.3 million in 25 years!
Disaster #4: Unexpected Travel Expenses
Whether you’re attending a destination wedding or your kids’ travel team playoffs, you can typically cash-flow these expenses—and keep costs down.
Look at your budget and reallocate everything that’s extra—like entertainment, eating out and new clothes. Funnel that money toward your upcoming travel expenses. You can even temporarily redirect your car savings or new-couch savings for a month.
Then start hunting for deals on hotel rooms and flights. Maybe driving or using Airbnb would be cheaper. You can make it happen, as long as you work it into the budget first.
Disaster #5: Owing a Bunch in Taxes
You were expecting a check from the IRS, not the other way around! Whatever the reason you owe extra money, don’t sweat it. You can figure it out. Even if it’s several thousand dollars, your budget can help.
If you can’t pay your bill right away, talk to the IRS about a payment plan. Then work that amount into your budget each month going forward. Keep in mind, there are usually penalties and interest associated with these plans. So factor those in as well.
After you pay off what you owe, revisit your tax withholdings with your employer. That way, you aren’t hit with a big tax bill next year. Or, if you’re self-employed, set aside money in your budget each month to cover your future taxes.
Peace of Mind Starts Here
The average American might get stressed about any number of these money disasters—but you’re different. You’ve got the power of a budget in your hands.
That means you get to decide to stop worrying. With a budget in place, you’re more than prepared for any pop-up expenses that come your way!