My system of “No Crash Budgets” teaches you about interest, debt, savings and planning for emergencies while still living the lifestyle you want to live. My system is adaptable and flexible to you and your wants and needs. It allows you to still get your wants.
Saving money is a lot like losing weight or getting healthy. I advocate for a system of saving money and getting your finances in order that is sustainable unlike a “crash budget”.
- Be Real. You must set manageable, realistic goals. Just like when losing weight, you won’t go from $500 in savings and thousands in personal debt to $10,000 in savings in one year. Think about the times when you have gone on a diet and you cut out all sugar, soda and flour. It made you grouchy for a few days and then sometimes you come out feeling great. With a budget, a system allows you flexibility will help you keep on track.
- Focus. Find an area to focus on. Once you have a minimal amount in savings ($500-$1,000), it is more beneficial to focus on paying down your debt. But, if you’re paying down your debt and you don’t have a cushion for emergencies, then you go right back to the start. Dieting without a clear focus will not be as successful.
- Plan ahead. What actually constitutes an emergency? Things come up all the time. My kids need money for school things and it can feel like an emergency but it’s not. Christmas, birthdays and entertainment are not emergencies. So, I don’t touch my emergency fund. I put away money every month for Christmas. I also look at whose birthday is during the month and set aside money for that. When you diet, if your house is full of brownies, you’re not going to lose weight. If you plan ahead and fill your kitchen with healthy items, you are prepared.
- Track. Track where you are spending your money. Tracking money is an important part of setting up a sustainable budget. Each time you get paid, you should be evaluating how much you’ve spent and where. If you’re out of money in a budget category, can you quit spending or do you need to evaluate another area to take the money from? Track where you are at every month. I even like to make a chart in Excel that shows my savings growing and debt decreasing. If you’re not stepping on the scale or noticing a change in how your clothes fit, the diet will not be as effective.
- Deal with setbacks. If you have an emergency fund established, you can handle emergencies. Does it seem like you have more emergencies than most people? Is your house old, your car old, or do you have medical expenses? Even when emergencies do arise, I can look at my budget and see where I could take money so that I don’t need to touch my emergency fund. When you use your emergency fund, start building it back up right away. Every few months, you can evaluate if your savings fund is enough for you. We had to replace a broken furnace during the first week of January. We had half of the money saved up because I knew it was coming. Along with that, we will be replacing our a/c unit in the spring. I am planning ahead and saving the money for that so it is not an emergency. Sometimes when you’re getting healthy you have an injury or just gain a few pounds back. You can quit or you can deal with the setback.
- Understanding debt, savings and interest. I recently saw a statistic that the average American owes $15,000 in credit card debt. I want you to understand debt. You can have a car loan and a mortgage as long as you understand exactly what it is costing you. Paying interest means you are sacrificing other things. You should understand interest, tax benefits and decide which is the most important debt to pay off first in your case. Muscle weighs more than fat so the number on the scale doesn’t mean everything. Sometimes, a few pounds is a good thing.
As always, I offer tax and budgeting advice for free. Contact me through my website. You can also follow me on Instagram at nocrashbudgets