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Mastering Budgeting: Tackle Unexpected Costs Efficiently!
Your Finance Travel Buddy presents One Simple Step
Hello fellow Financial Freedom Seeker
Mindset Moment
Fail to plan, plan to fail
Welcome to our special edition daily budgeting tips
Your One Simple Step today is…
Plan for Unexpected Costs in Your Budget
Why is this important?
When businesses create a budget, if they’re smart they create a provision for unexpected expenses.
This is like a sinking fund whereby there is money set aside in the budget so that unexpected costs can be paid without reducing profits in the budget.
The reality of life is that unexpected costs occur. Especially when you own your own home or furniture. In the last year alone my washing machine and living room TV have broken down, requiring replacing.
By having a provision for these types of expenses, you’re protecting your net income after expenses (essentially profit), from unexpected events.
You’re helping yourself stay on track for your budget goal even if the unexpected happens.
How do I implement this?
Think back over what unexpected costs you have had in the last year
The nature of unexpected costs vary depending on your circumstances. If you own a home I could bet on some kind of unexpected maintenance cost rearing its head. But if you rent then these costs would be on your landlord. So it’s a good idea to think through what unexpected costs you have incurred in the last year and how much they cost.
Think about what unexpected costs could occur this year
Some types of unexpected costs can also be guessed based on current life circumstances. For example, have a friend in a serious relationship? They may very well end up engaged this year in which case you might want to get them an engagement gift. It’s worth thinking about what unexpected costs could be incurred this year, that haven’t been before, based on what is happening in your and your loved ones lives.
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See below for our readers goals with your budgets - love that you’re all striving for improvement! 💌
😫Have you incurred unexpected costs in the last year? |
Have a fabulous week ahead!
Until tomorrow
Pernia | Your Finance Travel Buddy