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.

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