Spending Plan & Emergency Fund 101

LightsLast time we touched on spending plan surprises, those expenses that aren’t fixed and routine. Things like unexpected car repairs or special anniversary gifts that can derail your cash flow. This seems to be a great time to talk about building an emergency fund. Back before the economic meltdown, financial advisors recommended a reserve at least six months and optimally up to 18 months. For those of us who live in the Bay Area, we scoff at this seemingly insurmountable figure. Realistically, in light of layoffs and other employment challenges, many of us need this safety net when looking for a new position or transitioning into a new career.

Spending Plan Surprises: Managing Varying Expenses

Now that you’re fresh off the 7-Day Challenge, you’ve got a better handle on your spending. Last time we talked about creating an accurate spending plan, one that incorporates a realistic accounting of your income as well as costs. Fixed and routine expenses (like rent or mortgage payment) are easy to manage, but I find that my clients have a much harder time remembering and dealing with those expenses that vary or are sporadic. Spending plan surprises can derail your efforts toward living a financially organized life.