Is your budget missing some categories? You have your rent, your utility bills, your groceries and your car payments — what else is there?
These are three more categories you need to add to your budget.
1. Emergency Savings!
Every single budget should include a category for emergency savings. These are exactly what they sound like: savings that are specifically reserved for urgent, unplanned expenses. You will need them to help cover plumbing fees after your toilet overflows, repair fees when your AC unit breaks down or treatment costs when you have to rush to the dentist.
Without emergency savings, your options for handling an urgent, unplanned expense are limited. You could use funds meant for other budgetary needs, but this could cause a ripple effect of financial problems. You could miss important bill payments, bounce checks or run out of money long before your next paycheck.
Do you have other options? You could use your credit card to cover the urgent expense, as long as your balance isn’t close to the limit. Or you could try to apply for a fast cash loan — find out what are fast cash loans with quick applications and what are the requirements to apply for one of them. Both of these options allow you to manage the emergency expense with borrowed funds and then make repayments later on.
It will be easier to handle emergency expenses when you budget for them. Put emergency savings as a category in your budget and move those savings into a secure emergency fund. In a matter of months, you’ll have a small safety net.
2. Debt Payments!
Do you have outstanding debts? Do you have credit cards with high balances? Do you have lines of credit close to their limits? Do you have student loan payments that you’ll have to make once the federal student loan moratorium ends? Then you need to add debt payments as a separate category in your personal budget.
Your debt payments won’t go down unless you prioritize them. Assessing your budget to see how much you can afford to put towards your debts will help you tackle them faster — before interest rates force them to grow and get out of control.
Plus, tackling outstanding debts on credit tools like credit cards and lines of credit will give you more available credit to utilize in the future.
3. Fun Money!
“Fun money” is a casual term for funds reserved for your enjoyment. You can use them for streaming subscriptions, video games or nights out with friends — whatever you like to do to blow off steam and have fun.
Why is “fun money” an important category? When you don’t leave yourself any room for enjoyable expenses, you’re not going to stick to your budget. You’re going to feel restricted and resentful about the guidelines you set for yourself, and eventually, you’re going to start impulse spending.
Think of your budget like a diet. If your diet is so restrictive that you can’t eat any of the foods you usually enjoy, you’re going to be miserable. As time goes on, you’ll be tempted to ignore the rules and binge on those foods. It’s easier to maintain a healthy diet when you allow yourself to eat “unhealthy” foods in moderation.
Don’t forget to include these three categories in your personal budget. As you can see, they’re essential for your financial well-being.