Ten Items to Include in Your Budget
When considering all your budget options, remember to include these 10 important items.
Creating and sticking to a household budget can be difficult in the best of times, and doubly so in the face of unexpected financial challenges like the economic fallout from COVID-19. However, today's economy points out the importance of creating a budget that allows you to both live comfortably and also save money for your future. If you haven't yet set up a budget, now would be a good time to get started.
Nevada State Bank has an online home budget analysis tool that allows you to input your income and expenditures to see where your money is going and help you decide how much you have to save and spend. 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 job layoff, car trouble, or any number of other budget stressors. The bottom line is that you need a savings account – a sum of money that you don’t access until it’s really necessary. 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 at least liability insurance is against the law. According to the Department of Motor Vehicles, Nevada requires that automobile liability insurance policies carry minimum coverage of $25,000 for bodily injury or death of one person in any one accident; $50,000 for bodily injury or death of two or more persons on any one accident; and $20,000 for injury to or destruction of property of others in any one 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 big trouble 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.
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.
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. Click here to get started with Nevada State Bank's budgeting tool.
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 Zions Bancorporation, N.A. Member FDIC