Financial Preparedness - the Importance of a Monthly Budget

http://americanpreppersnetwork.com/2012/06/financial-preparedness-the-importance-of-a-monthly-budget.html

By Stephanie Dayle - Tue Jun 12, 5:58 am

Financial Preparedness means, you are as ready, financially, as you are well supplied for any disaster that may head your way.  All the supplies in the world won’t help you if you are lambasted by your bank or the IRS and evicted from your home because you couldn’t make ends meet and pay your bills.  Out of all the things we prep for, the least likely of them to happen, always seems to be the ones I hear about people preparing for.  Those black swan (or SHTF) events are a real possibility and worthy of preparedness, but in the scheme of things they are not likely.

The chances of a second Great Depression are far greater than the much talked about single day economic collapse.  A prolonged depression may in fact lead to a collapse eventually, but it could last a long time.  When we “prepare”, its not just of those really bad single day disasters, it’s for ANY emergency, including a job loss or economic depression.

If the above scenario were to take place; you would STILL have to pay your bills.  If you don’t, I can almost guarantee you – there will STILL be plenty of people around to haul your butt into court and either repo your property or put a lien on your house.  If your creditor or bank goes under, someone else will buy or assume the debt, maybe even the government.  Some of the last good paying jobs around will be that of debt collectors and repo men.

The only way you can prevent this from happening, in good times or bad, is to pay off your loans and adopt a debt free lifestyle.  An economic disaster is NOT your ticket out of paying your bills.  Getting out of debt takes hard work and discipline, but the pay off in financial freedom and ultimate preparedness is great.

As you start working towards your debt free lifestyle, your first step can be setting up a monthly budget as described in my previous article here.  Setting up a monthly budget is important because it is taking control of your money.  “It’s making your money behave” as Dave Ramsey likes to say.  A monthly budget is you telling your money what to do, rather than you sitting back at the end of the month wondering where the heck it all went.  It’s a plan, and success always comes quicker with a plan.  People hear the word “Budget” and they think “no fun” and “I can’t buy my preps”, but it doesn’t have to be like that.  There are tons of ways to prep while on a budget, and when you do get out from under that debt think of how relieved you will be, think of how free you will be!

Remember, there is no point in doing this if you don’t stick to it.  Your monthly budget should be done at the end of each month, prior to the next one starting.  Make a rule that if you don’t write it down, you don’t spend money on it.  This is the ONLY way to prevent that ‘lost’ feeling one gets when you sit down to pay bills and wonder where all of your money went.  People who budget know EXACTLY where their money goes and what it is doing.

More Monthly Budget Details – Prioritizing:

• When you are setting up your budget, pay your DEBTS first before other stuff, starting with your mortgage.  Your mortgage should always have top priority over other bills like cable or internet.
• If you owe any taxes these should also take top priority – the IRS is the most powerful debt collection agency in the world and they answer to no one.  Make sure you take care of your taxes.
• Your next priorities should be things like power and water, then you can move on to vehicle loans, then credit cards.  What you are doing, in a sense, is giving priority to things that will keep you alive and safe and allowing you to get to work before you are addressing things that keep you comfortable and entertained.
• Once money is allotted for your bills, then designate an amount for food in the form of groceries.
• Next, before you start paying extra on any bills, set up a “saving account” somewhere for an emergency fund.  And devote as much as you can to it, even if its only $10 a month.  Start with a goal of one month’s income (whatever your household makes in one month) and work your way up to six months.
• After your bills are paid, your home is stocked with food for the month, and you’ve sent a little money to a savings account, then move one to extra activities for kids (YES, your bills and savings take priority over your kids’ entertainment and enrichment), cable, internet, and lastly “eating out / shopping” if you have the funds to do so.

Preppers will often scrap those last three categories and opt to use that money to prep.  Most seasoned preppers have learned important lessons like prioritizing, sacrifice, and responsibility.  We have learned that our family’s safety and security is more important than going out for some sushi on a Friday night or that football package on TV.  It doesn’t mean that we don’t have any fun at all – it just means we’ve focused our efforts and resources into what is important for us.