Ten Items to Include in Your Budget
When considering all your budget options, remember to include these 10 important items.
Depending on your current financial situation, budgeting can be easier said than done. With so many bills – some necessary, others perhaps not as much – it can be tricky to stay on a budget that allows you to both live comfortably while also saving money for your future.
An important part of creating a budget is making choices. How important is it for you to spend money on a weekly date night with your spouse? Is saving money on your grocery bill more valuable to you than eating organic, locally sourced food? Do you consider high-speed internet a necessity, or is it just a convenience? When considering all your budget options, remember to include these 10 important items.
1. Emergency fund
Everyone needs an emergency fund of some sort, because let’s face it – emergencies that require cash can happen, and sometimes you need that cash quickly. This could be anything from a medical emergency and the bills that ensue, car trouble that could keep you from driving to work, or any number of things. The bottom line is that you need a savings account – a sum of money that you don’t access until it’s really necessary.
Life gets in the way sometimes. If you don’t have an emergency fund, you may find yourself in a desperate situation, and that can negatively impact other aspects of your life. An emergency fund may not seem like the highest priority in budgeting, but that can quickly change once you need it.
Like having an emergency fund, eventually, you’re going to need a retirement fund. If your employer offers to match some or all of your 401(k) contributions, then you should absolutely find room in your budget for this. It’s easy to see why this can be tremendously beneficial to your future.
3. Money to pay off debt
Paying off and/or reducing debt that you have accrued should also be a high priority. For one, the longer you let it stagnate, the more money you’re paying in interest. The quicker you can pay it back, the better. Not only is this in your best interest in the near-term, it will also help you in the long-term, as maintaining a good credit score can help you get loans you may need in the future.
If you have a substantial amount of debt, one thing to consider is taking out a home equity credit line to consolidate it, especially if you’re paying high interest rates. This will allow you to pay your debt off in one monthly payment, which can make it much easier to manage.
4. Car insurance
Car insurance is a priority if you drive, because not having it is usually against the law. According to the Department of Motor Vehicles, Nevada drivers must carry the following liability coverage minimums: $15,000 of bodily injury coverage per person and $30,000 of bodily injury coverage per accident.1 Beyond the legal aspect, your car is likely important to your everyday life, including for getting to and from work. Without insurance, you may find yourself in a pretty big jam should you get into an accident.
5. Health insurance
We’re all human, and that means things go wrong with our bodies no matter how much effort we put into taking care of them. Some things just can’t be avoided. Not having health insurance means tempting fate – a very expensive fate. If you’ve ever had to pay large medical bills, it’s easy to see how this can be dangerous if anything serious happens. Besides, until the law changes, not having health insurance means paying a penalty at tax time. Four million people paid penalties for not having insurance in 2016.2
6. Charitable giving
When you’re working on a budget for yourself and your family, it’s easy to ignore something like charitable giving, but you can get a lot of personal fulfillment out of setting some money aside to help others.
7. Trips and travel
When you work hard for a living, you’re going to need time to unwind, and for most people, vacation time means traveling. Even if you’re traveling during paid time off, the expenses can quickly add up between room and board, eating out, and tourist attractions. It doesn’t hurt to set aside money throughout the year for this purpose. Click herefor an article about the value of vacations.
You likely have special people in your life, and that means buying gifts for birthdays, weddings, holidays, and other occasions. If you haven’t budgeted for it, however, you may find yourself not being able to spend what you’d like.
9. Major purchases
Every now and then, you’re going to need to make an out-of-the-ordinary, major purchase, whether it’s an item that you simply want or one that you can’t go without. It’s really the latter that makes budgeting for such a purchase critical. If you know your washer is on its last legs, or your car is approaching 200,000 miles, it’s smart to sock away some money that will help you get the items you need without having to put yourself further in debt.
10. The holidays
While it may be missing the true spirit of the holidays, the reality is that in this time of year most of us participate in a great deal of gift exchanging with friends and relatives. Depending on how big your family and circle of friends is, this can get very expensive. It’s much easier to deal with financially if you plan ahead by budgeting for holidays gifts each month throughout the year.
Budgeting is all about prioritizing, and sometimes we let convenience and enjoyment trump importance. If you want to walk the path toward financial health and comfort, it pays to get your priorities in order sooner rather than later.
For related Two Cents articles on budgeting, please see:
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.