No matter where you are on your financial literacy journey, we all bust our budgets from time to time. Trust me, I’ve been there, done that. These five things can save your sanity and your budget if you remember to include them every month.
Save first. Every time. If you’re on a tight budget, it can be tempting to save whatever money is “left over.” But more often than not, by the time the end of the month rolls around, there won’t be anything left to save. Be intentional about saving, even if it’s just small amounts; it will protect you from going into debt when the inevitable rainy day hits.
2. Personal Pocket Money
In our house, we call this “blow” money, because we usually blow it. This budget item can be as little as $5. It’s important for you to have pocket money in order to avoid busting your budget on the little things that come up throughout the day.
For example, once a week someone in my office does a Starbucks run for everyone on our floor. I use my personal money to pay for this. It’s not a need — but the once a week treat helps me avoid the temptation to visit the drive-thru.
3. Miscellaneous Money
Unplanned events will come up during the month. I don’t care who you are or how long you have been budgeting, it happens to everyone. Do not set yourself up for failure by thinking you are going to plan out every single monetary transaction that occurs.
You may forget that it is Carol’s birthday at the office so you need to pitch in $10 for cake and a gift. Or the kids will forget to bring that permission slip home until the day before and you will have to dole out $15 unexpectedly.
Miscellaneous money is grace money. Give yourself the grace to be imperfect with your budget.
4. Sinking Funds
This may come as a surprise to you, but Christmas will be on December 25th this year! Just like last year and the year before that. How much less stress would you have during the holidays if you started saving for Christmas right now? Even if you simply start with $100 a month in July, that’s $500 by Christmas!
A sinking fund is just money you save for an event that you anticipate happening in the future.
Personally, I have a holiday fund, a vacation fund, and a car repair fund. This will look different for everyone. For example, if you know your washing machine is on its last leg, you may want to start an appliance sinking fund. Saving smaller amounts of money consistently for the unavoidable big purchases eases the pain when you need to spend a large amount of money.
Depending on your financial journey, you may be in a position to give money to a cause/charity you care about. Or you may just want to treat a friend who is going through a tough time. Most people have a desire to give but if you don’t intentionally create room in your budget it will never happen.