Just about everyone's had a major unexpected medical bill, car repair or other cost blow a hole in their budget. You may also lose your job or face a reduction in hours. To avoid having to scramble to pay your rent during a financial emergency, you need to plan ahead.
Build Your Emergency Fund First
Most financial planners recommend having an emergency fund with at least three months worth of expenses and sometimes as many as 12 months. How large your emergency fund should be depends on how stable your income is and how secure your job is. For Arlington apartments, a tenured teacher might need three months while a commissioned salesperson might need 12 months.
The reason to build these extra savings first is sometimes you have to pay in cash. If you've put all of your extra money into paying down credit cards or other debt, you might save interest and build your credit score, but you may not be able to get the cash you need for an emergency.
Set Aside Money For Bills Every Paycheck
Set aside money for your major bills every paycheck. For example, if you get paid twice per month, put aside half of your rent each time you get paid.
Some people find it helpful to have a second checking account for major monthly bills. That way they can make sure it has the right amount in it and know that money is off limits for other spending.
Don't Rely On Your Next Paycheck
Build up a buffer, so you're always paying bills with a paycheck that settled at least two weeks before the bill's due date. That way, if there are ever any problems with your bank or with your employer's payroll department, you're not left trying to fix the problem and get money into your account at the last minute.
Use Budgeting Software
Use budgeting software that links to your bank account to automatically track everything. Even if you don't like the strictness of budgeting ahead, you should know where your money's going, so you can cut back spending if needed.
To learn more about the ideal budget for our area, talk to our office.