If you don’t already have a budget, it’s a good time to start one. This is the best way to ensure that you are always in a position to pay essential bills. Here are some budget basics:
- Know what bills are due and when. Compare the timing of your set expenses (such as your mortgage, utilities, car payments, etc.) with your pay schedule. If you are paid weekly, you need a different strategy than if you are paid monthly.
- Ask electric and gas companies if you can get on their “budget” plan or “level pay” plan. Based on the history of gas or electric use in the home, the company arrives at an estimated annual cost then divides by 12 months. You are billed for the same amount every month. The utility company adjusts your average monthly payment up or down according to your actual use once a year.
- Know how you spend your money. Get in the habit of saving receipts. Jot down what they’re for if they’re not itemized. This is an easy way of keeping track of your cash expenditures. Then categorize all of your expenditures for an entire month. If money is tight, look for ways you can lower your spending. You will have to do your own analysis, but most of us have items on which we spend more than we need.
- Plan for large, periodic expenses such as car insurance and the water bill. Make a “budget calendar” showing the approximate amount of these expenses and when they will be due.
- Budget for regular maintenance and unexpected repairs. Some experts suggest budgeting 1 percent of the purchase price of the house for annual maintenance and repairs.
- Adhere to a regular savings plan. Many financial advisers suggest saving 5 percent of your take-home pay. You have to make this a top priority in order to be successful. You can’t just save whatever you have left at the end of the pay period.
- Always keep an emergency fund on hand. You need to have a “nest egg” so you can replace the hot-water heater when it suddenly springs a leak or other emergencies. If you don’t already have an emergency fund, you should start one.
- Plan ahead for major purchases rather than making impulsive decisions. Whenever you purchase anything on credit, look carefully at the financing terms, including the annual percentage rate. Often the retailers that offer the easiest terms (no payments for six months) actually charge the highest interest rates. Shop around. Try to save for things you need rather than charging them.