Tip 7: Always have some "disaster-money" on the side, just in case
When people are planning their budget and trying to obtain their financial goals, there is one important thing that they should remember when planning, and this is making sure that you have some extra money for those times in which a disaster strikes. Disasters can be anything that ranges from an unexpected car repair bill or the fact that you end up getting an unexpected bill at your home. However, whatever the little occurrence is that happens, the person who has some money on the side for just these occasions are going to find that they are better prepared for those times in life that they need to be. But, why should people have a disaster fund that sits on the side?
When unexpected expense arise, it is always better to utilize money that you have to pay these expenses. Those that do not have a disaster fund or savings account are going to have to resort to other means in order to pay these expenses, such as having to take out a loan, which is going to charge lots of interest. Or they are going to have to max out a credit card, which once again the person is going to have to pay interest on. There is no point in paying interest when you can have the opportunity to pay for this out of your own pocket. It just makes better financial sense to do this.
So when a person is deciding how much they should have in their disaster fund, they need to make sure that they have enough to cover those expenses that may arise. Of course, there is no definite way of knowing what amount you will need. However, starting off, the person should consider saving around twenty percent of their paychecks for those rainy days that are going to come. However, even if the person cannot afford twenty percent, they should be trying to put away as much as they can. A good way to do this is to make a budget. The person needs to note how much money that they need for those reoccurring payments each month, along with their grocery bill, mortgage or rent, car payment and anything else that they normally spend in one month. From there, they should conclude how much extra they have left, and then put this into a savings account.
When searching for a savings account, the person should be certain that they are getting a good interest on this account so that they are literally being paid for the money that they are saving. It is good to shop around and find the bank that is going to offer the bes rate and then choose this bank for their saving needs. Most people prefer to go with the bank that they are doing their checking with since it makes everything much more easier. The important thing to remember is that they should not touch the savings account or disaster fund whenever they want some extra money. The whole idea of having this is for those days in which the person needs the extra money.