Now that we have covered the different ways of budgeting there is one last step stabilizing our financial strategy. That step is to be prepared for upcoming expenses. There are two types of upcoming expenses expected and unexpected.

Unexpected Expenses are emergency expenses that show up from time to time.  To prevent these kind of expenses from coming in and ruining your budget you should have an emergency fund.   If you are still in debt (excluding a home mortgage) you should have a emergency fund of $2500 or if you do not own a home it should be aroun $1000.  Once you are out of debt an emergency fund of three to six months of expenses will keep the emergencies of life from ruining your financial future.

Expected expenses are things like Christmas, car repairs, house repairs, etc. We know these things are going to come eventually so why not set a little aside in our budgets each month to deal with these problems as they come and kill our budget for that month. Any expense that we know is coming due we need to save for throughout the months that precede that expense. So how do you keep track of this savings? Once again Joe Sangl has the best form I have been ablt to find for this purpose. So go over to his tools page and download the Monthly Escrow Account form. With this form we can determine how much we need to save each month in order to be prepared for expenses we know are coming. Here is an example from our escrow form:

 As you can see this chart shows how we can pay for Christams, car repairs, and other expected expenses.  This allows us to not have to dip into our emergency fund when these kinds of expenses pop up.  I hope these last few days of budget talk have encouraged you to get started on a budget and to enhance your life through good financial management.