Four Recipes to Financial Success

Below are four recipes to financial success. By that, I mean that if you focus and do just one of these things well, the chances of having success with your finances will increase. You can be successful and find a level of success that will propel you to even more success. Everything starts somewhere, and the beginning to making better financial decisions can start with the recipes or tips below.

A Recipe to Financial Success is Having a Plan for Your Money

Having a plan makes a big difference in whether or not we win with money. By plan I mean having a spending plan. I like to call it a spending plan for two reasons. One, it is a plan to spend your money. Two, when you hear the word budget, you think of restriction or something you cannot do.

Calling it a spending plan gives you permission to spend on purpose because it’s your money anyway.

Spend Less Than You Earn

Live within your means. Just because you have created a spending plan does not mean that you are home free. Now you must stick to your spending plan, which is a whole other thing. You cannot be successful and spend more than you allocated for a particular spending category in your spending plan. So, for example, if you plan to spend $300 at the grocery store, you cannot go out and spend $400. This kind of overspending is a destroyer of spending plans.

Financial Success is Preparing for Unexpected Financial Events

Another issue for spending plans is the unexpected event. Let’s say you created your spending plan and are moving well through the month. You are following your spending plan, and then an unexpected event happens. Your mom or dad gets sick, and you must travel to see them.

Emergencies or contingencies are going to happen, and although we know that they are going to happen, you cannot plan for them specifically, but you can plan for them in a general way by saving up an emergency or contingency fund.

With this fund, you can take care of emergencies and contingencies when they come, and it does not affect your spending plan. A good rule of thumb is for three to six months of expenses into an emergency or contingency fund.

Preparing for Expected Events is a Recipe for Financial Success

Preparing for expected events is another key to financial success. You have spent most of your adult life doing things the “right” way. You planned to spend your money, you saved, and lived within your means. Then you get to the point in your life where your children are ready to go to college, and you have not saved enough.

How about retirement, are you ready? Have you saved enough? If you have not, what do you do?

The other side of this is to plan for these expenses and begin to save for them. The key is to determine the number or amount you are trying to reach. How much will you need to save for your children’s education? How much will you need to retire the way that you want to? Once you find these numbers, you can begin to save and reach them. Preparation is the key.

These are just some of the keys to financial success…can you think of others?

You Need a Fund for Emergencies

An emergency fund or what some call a contingency fund allows you to stick to a spending plan without having to change and interrupt your budget to meet unexpected costs and expenses. You can plan better and manage your finances knowing you can cover emergency expenses as they arise.

Having emergency savings is extremely important in today’s economic environment. It may be the most significant difference between those who manage to stay afloat and those who are sinking into financial debt. Emergency savings of 3 to 6 months of expenses allows you to meet unexpected financial challenges such as:

• Car repairs

• Medical expenses

• Home repairs

• Other emergency expenses

Having an emergency fund also allows you to plan to spend all your money without worrying about taking care of emergencies that arise. Below are more emergency fund tips.

Emergency Funds give you Peace of Mind

The emergency fund not only allows you to cover these expenses, but it gives you the peace of mind that you are prepared for financial emergencies.

Not having an emergency savings fund is a reason many individuals borrow money at high interest-rates through alternative and predatory lenders.

Keep Emergency Funds Where you can get to Them

You will want to keep your emergency savings in an account that you will have ease in the ability to access as needed. This is called liquidity or the funds being liquid.

How easy is it for you to get access to the money when you need them?

It is best to keep emergency savings in a bank or credit union savings account so I can get to it when I need it. These types of accounts offer easier access to your money than certificates of deposit, U.S. Savings Bonds, or mutual funds. Keeping your emergency fund separate from checking accounts makes it much less likely that you will use these savings to pay for everyday, non-emergency expenses.

Get the Family Involved in Saving for the Emergency Fund

You may think that it is not so easy to save $500 to $1000 for emergencies. One way to make it easier is to get the entire family involved in building the emergency fund. It may be easier if you involve your whole family in meeting the challenge. Explain the importance of emergency savings to your family and get them to help by cutting expenses on the power, food, entertainment, and more.

Make your emergency savings fund your family financial goal and plan how the family will meet the goal. Keep the family updated and when you meet the goal be sure to celebrate maybe with a family fun night.

Having emergency savings is essential in today’s current economic climate. Having emergency savings will give you peace of mind about your finances. Set goals and celebrate when you meet the emergency savings goal. You need an emergency fund, and with some work and a plan, you can have an emergency fund for emergency expenses and peace of mind over your finances.

You Need an Emergency Fund

This is especially during this time of the COVID-19 pandemic. You never really know what happened. Either they lost a job due to COVID-19, or something else dealing with COVID-19 like a parent or close family member getting sick. Maybe they were not living within their means or got extended with bills, and just could not keep up.

As I sit here this morning, a car is being reposed right outside my window. Wow. It’s a nice newer jeep compass, black, with nice tires.

Boy, that happen quick.

I have had several cars reposed and I have never seen it happen, but it’s not a good feeling when it does.

This is especially true during this time of the COVID-19 pandemic. You never really know what happened. Either they lost a job due to COVID-19, or something else dealing with COVID-19 like a parent or close family member getting sick. Maybe they were not living within their means or got extended with bills, and just could not keep up.

This is why working from a spending plan and planning to spend our money is so important. A spending plan will help you keep spending in check and help us avoid negative experiences with money like repossessions.

Whatever the case, when this happened to me I did not have an emergency fund that I could turn to and most people don’t.

An emergency fund or contingency fund, what I like to call it, is just what the name implies, it’s a pool of money that is used for emergencies. A fully–funded emergency fund could equal whatever you wanted it to be, but most would suggest an emergency fund of 3 to 6 months of living expenses.

If you do not have an emergency fund or contingency fund, start today, start where you are, and start building yours.

If you do not have any financial goals, make it your first financial goal…a fully-funded emergency fund, and then save toward the goal.

Did you know if you saved $83 a month in 12 months, you would have $1,000 saved in your emergency fund.

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