Making a Budget - pt 2: The Emergency Fund

Part of your budget needs to have a healthy chunk going towards an emergency fund. My parents have a couple names for this bucket including "Mad Money" (which must be a movie reference or something), I call it my "high interest account", but whatever you want to call it, this is money you never touch. It is the just-in-case money that pays for a new roof (and allowed me to pay for mine all by cheque at once and get a hefty discount), it is the money to pay for a sudden pet's illness, and it should be one of your first major focuses if you don't have one yet. 

Even if you have consumer debt with high interest you need to pay off, you STILL need to put money into this locked and no-touch account though. Money should go into this account and basically never come out, so allow for it in your budget at whatever amount you can actually afford. Before you cut the savings allowance in your new budget, cut the clothing budget or substitute two meals a week for canned soup from the back of the pantry!

If you have debt, hunkering down and holing up to spend every penny possible on this high interest oopsie is even more important. Still save, but instead spend 3 committed months to eat out of the freezer, watch Youtube tv shows instead of going to the movies, use those gift cards you got last Christmas for entertainment/food, and spend every penny getting rid of that useless and ever-growing debt. I read a great blog entry I should have saved which was basically a couple who "disappeared" for 3 months in order to pay down $8000 of debt - they didn't eat out, they sold whatever they could, they picked up odd jobs, and they actually paid off all that debt with just 3 months of being absent from the social world. 

I mentioned eBay moments and side hustles in my first budget blog, and above in that couples 3 month dedication... So you've made a budget that is based on your fixed income, what do you with all the extra money (hopefully!) that is above and beyond?Instead of taking any extra money and spending it on a home decor item or a dinner out to celebrate, put it towards your future (I know, I'm a killjoy). Boost the savings account that month or pay a little more on the credit card. You can never have enough savings!

Now there are a bunch of Pinterest "schemes" of how to save money without realizing it - such as the "every $5 bill you get you save away instead of spending", or the "week 1, put away $1, week 2 put away $2", and you can read a bunch of blogs and stuff with other examples to get the idea. These might work for some people, but to be honest, they are hard to maintain, remember, AND budget for. If you are just getting started with budgeting, start squirreling away a set amount each week and month for your savings account. You can plan around this far better, and if you set it up as an automatic transfer on payday you won't even notice (which is what I do and strongly suggest).  If you want to do one of these other saving schemes, feel free, but it should come out of your after-savings budget if that makes sense (so outside of that automatic transfer). I do this too with any change that is in my pocket by the end of the day, and at the end of like 6 months I have enough to get a great dinner out (at like East Side Marios where I can get 2-3 meals out of one order with their unlimited soup/salad and bread!), or enough to buy a souvenir at my next little mini vacation. It's not much, and I don't notice it daily, but since this is already after my $25 automatic transfer to my savings account, I feel like I can "splurge" a little with this "found money". 

The moral: Don't skimp on your savings. Make this a number you are proud of, and feel safe with, should anything go wrong.