Planning For The Absolute Minimum
Life is always making changes that you’re not expecting to come. When it happens, most of us start to worry whether we have enough money to get by, whether it’s on our own or with a spouse.
This isn’t quite the same as budgeting, although there’s a major component of it there. In this case you’re not looking to determine ways of getting out of debt. You’re looking at finding ways to survive until you can get back on your feet, and always believe you’re going to get back on your feet, even when things look bleak.
What’s the first thing you need to do, after panicking? First, stop panicking; that never gets anything done. Second, pull out some paper or fire up Excel because it’s time to write things down.
Start out by logging all the big ticket items you have. Most probably it’s going to be rent or mortgage and your car payment. If you have any other big loans, write those down. Next, think about anything else that you pay monthly, which means credit cards, phone bills, insurance, etc. The last thing is going to be the hardest, which is an estimate of how much you pay for gas and how much you pay for food on a weekly basis. These are just averages now, so don’t worry about being too precise.
Add that up, and you have the absolute minimum you need to make sure you generate, or at least have to pay bills, on a monthly basis. When you see it hopefully it doesn’t look too daunting, but at least it gives you a starting place. Unfortunately, it’s not over.
Now you have to write down those things that don’t come around every month. For instance, if you live in a house you probably get a quarterly water bill. You’ll have to get your car inspected every year; registration every 2 years (that’s what it is in New York; it might vary where you live). One of my clients pays for dog insurance once a year; that’s a nice chunk of change, that’s for sure. Those items go into another column, so they’re not part of your regular monthly bills.
Because of this second column, once you have the first column you should add 10% into your figure for comfort and to deal with those things you may not have thought of that invariably will come up. That’s just to be on the safe side.
Once you see it for what it is, at least now you can deal with it. For instance, if you wrote down cable, maybe you can find a way to reduce that bill by eliminating some services. Maybe you can alter how much coverage you have on your car; raising deductible rates temporarily can save you a lot of money. Maybe turning down the heat or restricting the air conditioning in your house reduces your monthly utility bill. Sometimes it only takes a few minor changes; even changing your food bill, buying only necessities and looking to buy things in bulk can save money and make paying those bills easier.