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Are You Prepared?

It has been a long cold winter, and one day you come home and it is freezing in the house. Once the repairman is called you are informed the you need a new heater. The estimated cost $5000. This is something homeowners insurance does not cover. It is up to you to come up with the money. Do you have an extra $5000 laying around? I know I don’t, and neither do nearly half of American households. Even households with an annual income of $250,000 or more, about 16% of them do not have the money for significant home repairs. So, how do we prepare for something we cannot predict?

The Gallup poll asked households the same question in 2011 with similar results, but this time they took the questions a step farther. Gallup asked if the households had enough money “to make ends meet on a daily basis.” The results were shocking, but nothing new. According to Gallup, 7 out of 10 households struggle to buy the things they need on a daily basis. The results raise more questions, such as “How much money should I have?” and “How do I work within my means?” Many Americans struggle with, and there is no right answer for everybody.

The first step in insuring that you have enough money for day-to-day life and emergencies is to determine how much money you need to cover expenses on a monthly basis. Track your bills and other spending. You need to know how much money is coming in and how much is going out. This is you cash flow. You should never spend more than you take in. If you are, then you need to examine your other spending to determine what to cut or reduced to make ends meet.

Once you have established you cash flow it is time to make some financial goals. This could be anything from paying off a credit card to setting aside money each month in savings. The goal needs to be realistic to your circumstances. Do not go outside you means to make the goals, but make sure they are something you can accomplish over time.

To be prepared for anything, it is important to set aside money each month. Make sure it is something that can be set aside regardless of circumstances that arise. The best way to do this is to pay yourself first. Many companies have electronic deposits. You can set up a certain amount to go to savings each month, and you will never see it. Keep some for emergencies and make sure to set some aside for retirement.

The key is to set a balance. Make sure you cover your needs, including savings and retirement, and then if there is extra you can pay for the extra. It requires a change in attitude for many to look at money in a different way. It will take time and patience.

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