Most people are only a paycheck or two away from financial calamity. Simply put, temporary or permanent cash flow interruption and not having a large enough emergency fund. What, if any, benefit will come from the pain and agony of putting a budget together going to do to solve this? Simply to know exactly how quickly the situation will deteriorate if you have run out of cash
– again how will that change anything if you lost your job or become sick. The budget is not what makes you rich or stabilizes your finances or provides any magic what so ever. However if you do not have one, you will never likely be rich, you will never likely know that feeling of having financial stability. Why??? Well, if you do not know that you are doomed if you loose just one paycheck than you will likely never do anything about your emergency fund. If you are doomed if you break your arm snowboarding than you will likely never get health insurance. Your family will be Doomed if you die in a meteor shower and do not have a rider on your policy that covers meteors. It is a way for you to take ownership of where you are and where you are going and what is missing and what needs to change.
What stays what goes:
Do you drink too much? Smoke too much. Do you enjoy rice Creme Brulee from the Tao Restaurant in Vegas??? So make a budget, make some tough decisions about what stays what goes. Build at least one paycheck into your emergency fund in the next 3 months WITHOUT adding to your current debt! That means working within your budget.
If you really cant make any changes to your budget make more money. If you knew that you were $100 short every month I suspect that the amount of energy and time stressing, talking over coffee with your friends, ranting on the interweb etc. Etc. You will likely be able to find some source of funds – I don’t care if it is collecting bottles, delivering the paper or a part time sales job.
If your situation is to overwhelming and the budget has just confirmed that you are in way over your head, your credit is trashed or you just want to speed the debt free process from 79 years to 3 to 5 years than consider some of the other options available to you. This is part of creating a game plan for you and your family. The budget is mandatory before you even consider any of these other options.
Not so simple steps:
1 Monitor spending for 2 months .
2 Formulate a game plan: take a deep breath, sit down with the whole family ,(budget and Plough through it, budget and bankruptcy, budget and credit counseling, budget and cut a deal… )
3 Zero balance budget. Put a given amount of cash corresponding to a given category into a box, barrel, bottle, envelope or whatever. Spend till it is gone and spend no more.
You will have a 3 month emergency fund, you will be debt free in 5 – 15 years (depending on strategy). You will have life insurance, health insurance. You will have a will and living will. You will have a retirement plan. You will have turned your life around. You will still have a budget.
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