When it comes to the big things in life, you know you need to budget. Things like Christmas, New Year’s, and Spring Break need some extra attention. When you improvise these special events, it’s easy to lose track of your purchases and miss opportunities to save. But a holiday budget isn’t a flawless financial plan if it’s skewed too heavily towards these events. Your budget needs to work all year round.
It also needs a dose of reality. Sadly, reality is often ugly. Though you hope the months preceding Christmas or a big vacation go smoothly, they don’t always go off without a hitch. You can get laid off, get sick, or get hit with a costly repair. A budget meant to help you pay for discounted presents or predetermined airfare won’t help you cover weeks (or even months) of unemployment.
A holiday budget doesn’t always show you how to handle unexpected expenses. It only helps you set aside cash for things you know you’ll have to buy. The Christmas dinner turkey, the Christmas tree, and the presents that go under it are all things you expect out of the season. You know how much these will cost, so you know how to plan for them. A sudden breakdown with your furnace, an emergency trip to the vet, or a parking violation fine aren’t predictable, yet their payment is every bit as important as the food and gifts that you plan.
Some Americans can cover repairs, bills, or a sudden job loss with savings, but the number of individuals who can do this is dwindling each year. According to the latest stats, almost 70 percent of the nation doesn’t have enough money set aside to cover emergencies of $1,000. Almost half of these people have absolutely zero savings. That means they’re living paycheck to paycheck for when their weeks go according to plan. As for those weeks that don’t, they turn to personal loan companies for online loans to cover unexpected expenses.
Living paycheck to paycheck signifies a chronic financial problem, and it’s usually the result of several factors. Some reasons may include the fact that these people don’t get paid enough, their fixed expenses (like rent) are too high, and they don’t manage their finances properly. In which case, no homemade budget is enough. They need to speak with a professional to learn about how they can manage or consolidate debt and save for their future.
If you do have enough savings set aside to cover these emergencies, then you can solve your own financial problems. Your next step has to be re-adjusting your budget to accommodate the unexpected. Financial experts recommend you breakdown your expenses into three main categories: the necessities, fun money, and savings. The necessities cover regular expenses like rent and groceries and should take up roughly 50 percent of your income. Fun money is at it sounds. It encompasses all the wants in your life. Roughly 30 percent of your income should go towards frivolous spending or special events like Christmas.
Savings, meanwhile, should take up the remaining 20 percent, and it should cover contributions towards debt relief, a rainy-day fund, and retirement. While retirement planning is an obvious requirement if you expect to live your golden years in comfort, the other two may not be as clear. Debt relief is there to help pay down any online short term loans, credit cards, or mortgages you have, and the rainy-day fund is there to replace these products, so you can cover unexpected demands on your cash, like a household repair or medical emergency, on your own.
The next time you sit down to pen a special budget, don’t let your excitement for the holidays distract you. Your budget must accommodate everyday savings if you expect it to be an effective one. Check online for tips on how to start your first comprehensive budget, and see how you can plan for the fun stuff and your future.