Survive today, prepare for tomorrow, have fun. In that order. What exactly does that mean with regard to budgeting?
Whenever I am budgeting, my first priority is to make sure I have money to literally survive today. What do I need in order to survive today? In a literal and very basic sense: food, water, and shelter. However, I also need to be able to pay for utilities on a monthly basis as well as transportation to and from work. So, the first few funds in my budget are Groceries, Utilities, Mortgage, and Gas. Currently, I do not have a car payment, but when I did that was on the list as well.
I realize that it is fairly unrealistic to survive on only the things mentioned above. For the sake of reality, I include funds such as Cell Phone, Car Insurance, Medical, and Homeowner’s Insurance. Before I spend any money on anything else, I have to make sure that these funds have enough money in them to cover their expenses.
Prepare for Tomorrow
After I know that all of my financial needs are covered, I shift my focus on preparing for tomorrow. This means establishing savings funds for future expenses or goals. For me, these things include the Emergency, New House, Retirement, and New Car funds. These funds ensure the financial security of my future. Of these funds, I would say that the Emergency fund is the most important. I personally have $5,000 in my Emergency fund. I have heard other people recommend saving enough money in the Emergency fund to cover your necessities (see “Survive Today” above) for three to six months in the case of a loss of income. For me, my Emergency fund is money set aside for things such as medical emergencies, car emergencies, or any other large and mandatory expense that might come up unexpectedly.
That’s not to say that I don’t have money set aside in the case of a loss of income. I do, I just don’t have it specifically in the Emergency fund. If something were to happen that would result in me losing my income, my budget focus would shift from preparing for tomorrow and having fun back to surviving today. That would mean I would dip into the New House and New Car funds in order to put money into the Groceries, Utilities, Mortgage, and Gas funds. I would avoid dipping into the Retirement fund at all costs because of penalties that I would have to pay for withdrawing money too early.
I know that I said, “Survive today, prepare for tomorrow, have fun. In that order.” But, I actually prepare for tomorrow and have fun at the same time. The idea, though, is that preparing for tomorrow takes priority over having fun. When my “Survive Today” funds are covered, I take the remaining money and use it to prepare for tomorrow and have fun, but I prioritize preparing for tomorrow over having fun in the amount of money that each fund gets. For example, the Retirement fund gets $500 a month, while my Personal fund (money that I use to spend on random things I might want, like a turtle latte with an extra shot of espresso from Scooters) only gets about $200 a month. In my opinion, it would not be wise of me to spend $500 a month on random things I want and only put $200 a month into the Retirement fund. Here are the funds that are in the “Have Fun” category for me: Personal (mine), Personal (my husband’s), Date Night, Vacation, and Clothes. What? Clothes aren’t included in “Survive Today”? In my opinion, no. I already have clothes, I don’t need to constantly be buying new clothes. Do I want to? Absolutely. Are clothes, in fact, necessary? Sure. It all comes down to priority and mentality. I realize that, if worse came to worst, I could “Survive Today” with the clothes that I already own. I consider the Clothes fund to be in the “Have Fun” category because I really only need to buy new clothes on occasion. Not to mention, it is fun to go shopping, so to me it just makes sense.
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I have not taken into consideration anybody’s unique and specific situation. This post is based solely on how I personally do my own budget. Yes, it has worked well for me, but it is not a one-size-fits-all plan. If you would like one-on-one personal budgeting advice, please click the Budget Coaching button below or contact me to set up a free consultation call. Also, if you haven’t already, sign up for my monthly newsletter! I will be sending out exclusive content each month and you will get a free budget guide as a thank you for signing up!
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