Archived — You and Your Money (4)

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3. How will I get there?

Planning the details

Take a couple of days to think about your current situation and how you might make it better. Start by studying your completed Money Planner. If you continue spending your money as you are doing, will you be able to live within your income and achieve the goals you set? If you can't, what is preventing you? What can you change? Are your debts getting you down? (If this is the case, take a look at Reality Choices — Dealing With Credit.)

Analyse your current situation

Look at every expense item on the Money Planner chart. Do you want to spend more or less than you are currently spending on each item? Would you rather spend the money on something else? Amazingly, people often spend lots of money on things they do not value without even thinking. This often means they cannot buy the things they really want. Put your money where your desire is.

Make changes

Think back to the goals you set. Often when people look closely at their financial situation, their goals change. If you want to change your goals, now is the time.

You have now finalized your goals and thought about how to make your current situation better. Change the Money Planner chart accordingly. This time, ensure that your income and expenses balance.

Follow your plan

It is not necessary to do a new plan every month. Your completed Money Planner chart is a spending plan that you can follow until your income or expenses change or until you decide to change your goals. Keep the chart in a handy place so you can refer to it often. Your first plan may not work perfectly. There are bound to be some expenses you over- or underestimated. There may even be expenses you have totally overlooked. If this happens, revise your plan and try again.

Consider a savings plan

Without savings, long-term goals may never happen. Is that area blank on your chart? If so, consider the changes you could make in other areas to start a regular savings plan. If your current financial situation will not permit savings, keep them in mind for the future. This might be the case, for example, if you have decided to use as much of your income as possible to pay off debts.


Life is never as smooth as you might like. A sudden death, a serious accident, a strike, an unexpected downturn in the economy — any of these could put a serious strain on your income. Even a small but unavoidable overexpenditure in one budget category could begin a destructive cycle of borrowing from a second category to pay the first, from a third category to pay the second, and so on.

Having an emergency fund is one way of meeting these financial challenges. Here is how to set up such a fund. First, decide the total amount of money you would like to have in your fund. A general guideline is to set aside an amount of money equal to what you would need to live on for three months.

You might need more or less than three months' living expenses; it depends on the types of emergencies you are likely to face and how much money you can count on in each case. Once you have decided how much is appropriate for you, start saving monthly.

What financial emergencies might you have to deal with in the future? Calculate how much money you could count on in each case. Answering the questions in the following box will get you started.

Emergency Fund Tips

  • Keep your emergency fund separate from the rest of your money — no borrowing.
  • Your emergency fund needs to be readily available.
  • Your emergency fund must be reviewed yearly to ensure the amount is adequate.
  • If you withdraw money, replace it as soon as possible.
  • Use the emergency fund for emergencies only — not for car expenses, holidays or Christmas.

If you were to go on strike, how much strike pay would you receive and for how long?

If you lost your job, would you be able to collect employment insurance? How much and for how long?

If you had an accident or illness that kept you from working for a prolonged period, would you still receive an income? How much and for how long?

If you were to die suddenly, would your family have immediate access to sufficient cash for funeral arrangements and day-to-day expenses?

How much money would they need immediately?

What is the deductible on your car insurance policy and on your household policy?

What emergencies other than those already mentioned may happen to you?

Is there another income earner in your family? What is that person's monthly net income?