Have you ever been hit with an unexpected financial need such as a car repair, home repair, or school cost and you didn’t know where the money was going to come from to pay for it?
I’ve been there. Many. Times.
Learning how to take care of these situations can help you not only in the short-term but also in the long-term as well. In order to not be phased by needs arising and continue moving toward your goals, it’s imperative that you prepare for these situations.
How? Well, I’m glad you asked. 😉
Here are four ways to make sure your financial needs are always taken care of.
Don’t Let Your Needs Pile Up
I don’t know about you, there are plenty of times that something needs to be fixed or I needed to purchase something and I’ve put it off. Have you done this before?
This may seem like it’s “saving” you money but it isn’t for a couple of different reasons.
First, if you let something go for a while longer that needs to be fixed, there is a much greater chance that it will either cause more damage to itself or something else around it. For instance, if you have a leaky toilet that you put off fixing, it may end up eventually rotting out the floor and potentially falling through.
That would not be good!
Second, if you put off taking care of a financial need, you could be hit with other unrelated financial needs during that period. Imagine needing to replace a faucet at home and putting it off. Then, a couple of months later your phone screen cracks and needs to be repaired. Then, a few months more pass and you are hit with a car repair.
Is it financially easier to take care of these as they come or handle them all in one month?
Putting off your needs too much can cause you to no longer be able to afford them.
Don’t let your needs pile up to the point where you can no longer afford them.
Have an Emergency Fund
If personal finance experts were a band, then their hit song would be the emergency fund. It’s where everyone tells you to start, and there’s a good reason for that.
It can keep you out of financial ruin.
What happens if you lose your job? If you’re a dual income family, it might not matter as much if you are let go, especially considering you can get unemployment insurance for up to six months in most situations.
But what if you’re a single income family or you lose your job and are hit with a large car repair bill or home repair bill? This is where the emergency fund shines.
At the bare minimum, you should have an emergency fund of $1,000. This is a good starting point especially in the midst of paying off debt.
There are a number of factors to consider when figuring out how much emergency fund you should have for a rainy day.
If you have a mortgage and family to support and are a single income family, you may need more. If you have a secure form of income, are a dual-income family, or are single, you may not need as much.
Consider your personal situation and then make the call on how much you need. Make sure you actually have an emergency fund to guarantee your needs are taken care of.
Your emergency fund can be used in a pinch for when something “unexpected” comes up, but what if we changed what an unexpected expense meant?
I used to be surprised when I would have a car break down or something in my house break. Then, I had kind of an “Aha!” moment. It should not come as a shock when we have one of the expenses.
Plan for expenses that are bound to happen like car maintenance, home maintenance, and even some medical expenses. So why not budget for them?
Create some categories in your budget named car maintenance and home maintenance and set aside a certain amount every month.
For car maintenance, consider things like the age of your vehicle, if it’s still under warranty, and what type of insurance coverage you have. Similarly, for home maintenance, consider if you have a home warranty, how old your appliances in the home are, and how likely it is that something will rot out based on the home’s age.
For medical expenses, the key for budgeting is to know your insurance. Some insurance covers 100% of everything. Other insurance plans require you to completely hit your deductible before they start paying anything. There are some that fall in between here, too, such as paying a certain percentage of expenses before you hit the deductible.
The more you know about your insurance, the better you can plan.
Consider these things expected expenses and plan for them ahead of time. This will give you the best chance of making sure these types of needs are always easy to take care of.
Budget According to Your Values
Live beneath your means by saving money and not spending everything you make every month and your needs will always be met. The best way to ensure that you’re living beneath your means is to budget according to your values.
Budgeting according to your values helps with making sure you’re not spending as much as you make. The idea is that if you are no longer spending money on what isn’t important to you, it frees up money for what is important to you, your financial goals, and the things you need.
This makes budgeting much easier to stick with because it feels natural. It allows you to budget based on who you are rather than trying to conform to someone else.
Dig down deep into who you are and what you see as important in your life in order to budget successfully.
Taking Care of Your Financial Needs
Wondering how your needs are going to be met is a very stressful way to live. That’s a very stressful way to live. Manage your money in a way where you don’t have to worry about your financial needs by doing these four things:
- Don’t let your needs pile up. Take care of things right away rather than waiting until you have many needs—and an even bigger bill.
- Have an emergency fund. Have an emergency fund for those truly unexpected expenses while paying off debt, saving, or working toward your goals.
- Budget for “unexpected” expenses. Things that we know will come up include car repairs, home repairs, and some medical expenses. Budget for those in advance.
- Budget according to your values. Take a look at what’s important to you and budget using that information. This makes it easier to spend less than you make because you won’t be spending money on things that are not important to you.
Try these four things and say goodbye to worrying about meeting your needs.