Do You Have a Needs Only Budget?
- Monday, December 09, 2013
If your financial situation were to change, do you know how much or how little you’d need in order to “make it”?
I’m not talking about huge national or global disaster. I’m simply talking about a possibility of losing your income, facing medical challenges or maybe having another child and deciding that one of you will stay home for a season. Are you prepared, just on paper, for these or other life events?
Some time ago, just for the fun of it, I sat down and created a copy of our regular budget. I went through it line by line and eliminated everything that was non-essential. All I left in that budget were items we “needed” in order to have a roof over our heads, food on our table, access to basic utilities and transportation. To my surprise, my total monthly amount went down by close to $800! It was a very revealing exercise for many reasons, but here are my top 3 reasons why I believe everyone should have a Needs Only Budget and how you can easily create one.
Peace of Mind
A recent survey conducted by the National Foundation for Credit Counseling (NFCC) and the Network Branded Prepaid Card Association (NBPCA) shows that over 56% of adults in the USA do not have a written budget.
Bankrate recently reported that 36% of Americans are mostly concerned about paying bills or getting caught up on their bills.
If that’s you, just trying to make ends meet while wondering where your money is going every month, then having a written plan, a budget, is non-negotiable in order to make financial progress. The simple understanding of where each of your hard-earned dollars are going will give you the information you need in order to start making adjustments.
Having a Needs Only Budget will take you a step further and give you a peace of mind about facing unexpected life events. The feeling of knowing you are prepared will be worth a few extra minutes of your time.
Plan of Action
A Needs Only Budget is a great way to have a plan or a roadmap of what action steps are needed in order to adjust to your new financial reality.
Instead of panicking, you can simply pull out your Needs Only Budget, go though the list of items you’ve already decided to eliminate ahead of time (in case something were to happen) and you can spend the rest of your time looking for another job, considering other options like running a small home business (daycare, crafts, etc.) or simply enjoying some much needed time off.
Preparing ahead of time gives you peace of mind and protects you from making impulsive decisions in the moment of uncertainty.
Here is another interesting fact about budgeting. According to the research done by the authors of the book The Millionaire Next Door, the majority of those who are self-made millionaires not only have a budget but also track every single penny spent! If those with substantial wealth consider budgeting and tracking expenses as a key priority, all of us should pay attention and learn!
Opportunity to Save Now
Once you create your Needs Only Budget you’ll immediately notice how much you could be saving today, if you were to adjust your spending. Creating this secondary plan may open your eyes to possibilities of curbing certain budget categories in order to put more money towards debt repayment, savings or prepaying your mortgage. Having this quick visual will allow you to take a step back, think about your long-term financial goals and how a few small adjustments can help you achieve those goals sooner. Here are just a few of the items that may be an obvious candidate for adjustments:
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