Do I Need A Budget? Part 2

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America’s been independent all these years. Don’t you think it’s time to set yourself free? I mean, how long will you continue to live month to month, paycheck to paycheck? Really! Some of you just sighed with relief because you don’t think you live paycheck to paycheck. However, if a major catastrophe like hurricane Katrina or Alabama’s April tornadoes happened to come your way, rather than to the people on CNN, you’d be wiped out. Most people I know could not continue to pay for their food, utilities, debt payments, and rent for more than two months if they lost their main source of income. And lack of income or the high cost of goods and services is not to blame. The main culprit is lack of planning.

The vast majority of American families bring in more than enough to both supply their needs and have a reasonable emergency fund that will float them for six to twelve months in case of calamity. However, most people fail to plan for emergencies. The unexpected will happen…unless you learn to expect it. I like to think of emergencies as life that I didn’t plan for. This way, I train myself to think of things that frequently catch people’s finances off guard. For example, car repairs happen often, but how many people plan on getting a flat tire on the way to work or waking up to a bad alternator? Because I know these things happen all the time, though not necessarily to me, I choose to make sure I always have enough cash on hand to get my car fixed and get around while it’s in the shop.

But, “How do I budget for that, Mr. Black?” I’m glad you asked. Let’s use the past to give us foresight for tomorrow. If you’ve kept your auto repair receipts, this one is easy. The more records you find, the better. Follow these instructions to build an auto maintenance budget.

1. Locate all of your car repair & maintenance receipts.

2. If you have more than a year’s worth, divide the total money spent maintaining and fixing your car by the number of years covered by the receipts. For example, if you have $5,000 of repairs over a five year period, divide the $5000 by 5. This means you spend an average of $1000 per year on auto repairs & maintenance.

3. Divide that $1000 by 12 (for the 12 months in a year). This comes out to about $83.34 per month.

4. Set aside $83.34 each month to start auto emergency proofing your life.

This number will vary from person to person depending on the age of your car, how many cars you have, and how expensive your car is.

It may seem silly at first, just having money lying around doing nothing, waiting on an emergency. However, when trouble comes, you’ll be more than glad you were prepared. Best case scenario, you end up with piles of cash because your car never breaks down. Worst case scenario, you have the money needed if and when your transportation is a little less than reliable.

Remember, a budget is used to free, not to bind. Tomorrow looks good when you plan for it. Enjoy your independence!

Peace & Thanks,
Jamel Black
Personal Finance Coach

28 For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? 29 Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, 30 Saying, This man began to build, and was not able to finish. 31 Or what king, going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand? 32 Or else, while the other is yet a great way off, he sendeth an ambassage, and desireth conditions of peace.” Luke 14:28-32.

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