An absolutely critical step in emergency preparation is getting out of debt. JoAnneh Nagler used an electronic version of Envelopes to categorize her money and allocate it to her different budget categories, so she’d have money to spend, money to save, and money to pay off debt.
I came up with a simple division of bills and daily needs, from food, fuel, dry cleaning, and household items. And then ways to make savings meaningful by creating free multiple savings accounts. In my household, we have a travel account, car repair accounts, short-term savings accounts for unexpected expenses, and money for Christmas and the holidays. You have to make savings real for yourself. If you want an outlet shopping day, great, make an account for that.
Debtors usually are mindlessly spending on [what they think of as] daily needs. We might spend $300 on a bulk warehouse and expensive wine. We have no accountability. Now, with a spending plan, you learn to prioritize what you need and love. It’s not a constricting tool—it’s an eye-opening tool.
It’d be worthwhile to have a “year’s supply” account, too.