Budget to Financial Freedom - Debtor Account
I have posted a post called Budget to Financial Freedom - Prepare for the known, the unknown and your dreams , Budget to Financial Freedom - Reserve Account and Budget to Financial Freedom - Emergency Account. Today I’m going to continue and talk about another account in budget - Debtor Account
Debtor account, as what the name telling you, is an account that set to pay our debts in our budget. This account is very important as it is related to your credit. As I said in my post Debt Control - Control Your Debt and Repair Your Credit!?, low credit will block our dreams of financial freedom. Therefore we must maintain our credit in certain level so it won’t affect our life.
By aside a certain amount of money to pay your debt, you not only can gain back your credit by showing that you willing to pay back your debt, but you also can pay off some debt to boost your credit.
Paying debt is no more nightmares to us if we know that we have money to pay it monthly. So let’s set a debtor account and handle our debt bravely. The early you handle it, the earlier you can be financial free.
Here is the link to Part 1, Part 2 and Part 3 of this series.
Budget to Financial Freedom - Emergency Account
I have posted a post called Budget to Financial Freedom - Prepare for the known, the unknown and your dreams and Budget to Financial Freedom - Reserve Account” . In this part I will discuss further about the reserve account in budget.
Emergency account is an account that set for the unknown expenses in our budget. In our life, it is hard for us to predict the future. It really a headache if we need money for emergency cases while we don’t have. The best way to have some peace of mind when these events occur is to know you have funds set aside for emergency usage.
So how much we should put in emergency account? In this case, I can’t give you the amount because it is different for different people. Anyway the basic for emergency account is you must keep at least 3-6 months worth of take home pay for it. This will ensure you can continue your life at least 3-6 months when any problems occur.
So determine certain amount of your income that you can put into emergency account and build up the account slowly. Sometimes it is hard for us to save 3-6 months of income but we can build it up slowly. If you take action, slowly you can make it!
PS : Remember this money is not confused with reserved account as it is being saved for expenses that already occur or will occur in future.
Here is the link to Part 1 and Part 2 of this series.
Budget to Financial Freedom - Reserve Account
I have posted a post called Budget to Financial Freedom - Prepare for the known, the unknown and your dreams yesterday. In this part I will discuss further about the reserve account in budget.
Reserve account is an account that set for the known expenses in our budget. What is known expenses? Known expenses such as car insurance, home improvement plans, tuition, gift and etc, is those expense that we know we have to spend in 1 year.
So now you can add up all your known expenses and then divide the total by 12. The result will be your monthly amount of money that you need to se aside for reserve account.
Why we need a reserve account?
By setting this money aside each month, you will like you magically have extra money available when some of the big expenses such as insurance come due. Now you will feel easier to handle these expenses and no longer disrupt you budget or land on your credit cards.
Here is the link to Part 1 of this series.
