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5 Things Not to Cut from Your Budget

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When money is tight, you will need to cut your budget. You may have to limit spending due to a pay cut or because you realize that you are not making enough to cover your bills. It is important to handle this responsibly, but there are certain things you should never cut from your budget. These things can help to keep you from additional problems.

1. Do Not Cut Health Insurance

It is tempting to go without health insurance, especially if you are faced with a high premium each month. You may be tempted to cut your health insurance completely so that you can have the extra two or three hundred dollars a month. Medical costs can cause bankruptcy. Even if you are in great health, a sudden appendectomy can run you $30,000. Of course this varies from place to place. If you want to decrease your health care costs, then consider switching to a high deductible insurance plan and a health savings account. This will significantly lower the amount that you pay each month, but still protect you from a possible medical bankruptcy.

2. Do Not Cut Your Savings or Retirement Contributions

Cutting your savings should be one of the very last things that you do. Of course it does not make sense to be saving money if you are in the red each month, but you should be sure that you have cut everything else out of your budget first. Make a goal to save at least ten percent each month. If things are extremely tight try for five percent. It is only through saving money each month that you will truly be able to get ahead financially. Some experts say you should save enough money each month that it hurts just a bit.

3. Do Not Stop Your Debt Payment Plan

It is essential that you do not fall behind on debt payments. During tough economic times you may resent how much you are spending on debt each month. The sooner you can stop paying towards debt, the more money you will be able to accumulate. Before you cut back on making these payments, you should cut everything else out of your budget, including eating out, entertainment categories, and the gym. You should cut everything back to the bare minimum. Make your debt payment plan a priority, and you will be able to manage your budget more effectively as you clear up your debt.

4. Do Not Cut Car or Renter’s/Homeowner’s Insurance

It is illegal to drive without car insurance, and it is a good way to protect your assets if you were to be involved in a traffic accident. Additionally renter’s insurance is fairly inexpensive and can help you replace items if they are stolen from you. Homeowner’s insurance protects one of your biggest investments. It is absolutely foolish to even consider not having it. If your insurance costs seem high to you, you may want to shop around. Find out if you have discounts through alumni organizations, or your work. Combining your policies can also save you money.

5. Do Not Completely Cut Your Entertainment Category

Everyone needs a little bit of spending money. It helps to alleviate stress, and it can prevent you from overspending consistently. The key is to find the amount that you truly can afford and still meet your monthly obligations. It may be that you only have five or ten dollars to spend a month. You can find a lot of ways to spend this money, but it should always be something fun. This type of spending can allow you to relax and helps to prevent you from feeling like you are doing without.

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