Budgets aren’t perfect. No matter how much you plan, it’s impossible to predict every single expense, which can make it challenging to stick to your plan. Fortunately, you can weather any financial storm by making sure your budget has these at least these components.
1. Emergency fund
A car repair, medical expense, or sudden job loss can all wreak havoc on your normal monthly budget. Instead of panicking and going into debt after an emergency, you can give yourself peace of mind by starting an emergency fund.
How much money should you keep in an emergency fund? Well, the answer depends on many things, including the cost of your daily expenses, how hard your job would be to replace, and any other unique circumstances. One savings guideline is to save at least three to six months’ worth of daily living expenses, though some people may need more. That way, if you ever suffer a job loss, you would be covered for a few months until you found another job.
To prevent yourself from using the money you are saving for a rainy day, it’s a good idea to stash your cash in a separate savings account. You can start building your emergency fund by having money automatically deposited from every paycheck. (See also: 5-Minute Finance: Start an Emergency Fund)
2. Debt repayment
Debt can add up quickly and become overwhelming if you do not have a repayment plan in place. Whether you have a mortgage, car loan, student debt, or a credit card balance, it’s your responsibility to manage your debt.
You can take away the burden of debt repayment by tallying up the payments you owe and putting them into your monthly budget. This will keep you on track, accountable, and working to hit your repayment goals. To make more progress, aim to free up extra dollars every month and put that toward your debt. (See also: 7 Easy First Steps to Paying Off Debt)
3. Retirement fund
Do you have a plan to take care of…
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