Sometimes, unique circumstances—like owning an expensive car, or having a high number of accidents or tickets on your driving record—may require you to pay more money to insure your car. If this is the case, remember one thing: You always have options. One of those options is to search for an insurer who offers a good number of discounts. Another way is to create a budget that will help you balance your needs and your income.
According to the Federal Trade Commission, it's not only important to create a budget but to revisit it periodically so that you can make adjustments to any changes in your earnings or expenses. Here's how:
Break out a pencil (or pen) and paper. Budgets that are created and housed entirely in your head are no good. Taking that route is the easiest way to forget something important that could make a huge difference in your ability to budget accurately. If you're more comfortable using a computer to take notes or create a spreadsheet, just make sure you save your work someplace where you can refer to it as needed.
Add up how much money you take home every month. If you're not working a steady job and your income fluctuates, take an average based on your last six months' worth of earnings and use that as a benchmark. If you're not working but are receiving unemployment benefits, write this amount down, but always keep in mind any approaching expiration date.
Add up all of your expenses, including rent or mortgage, car payment, insurance premiums, utilities, cellphone, credit card, medical expenses, gas, and food. Don't forget to include any additional expenses like child care expenses or alimony. Be as thorough as possible and account for recurring expenses that aren't necessarily fixed—like daily stopovers at your favorite neighborhood coffee joint, movies with friends or family and an approximate sum of how much you typically spend on the average shopping spree. This total gives you good insight into how much extra money you're spending that you should be saving instead.
If the sum of your expenses adds up to more than what you're bringing in, consider some cuts. Go down your list and eliminate any unnecessary expenditures, and leave only those that you absolutely need to pay for the roof over your head, your car and insurance, food, utilities and medical expenses. You can assign a small percentage of your earnings for "fun," but never let this amount exceed what you can afford. Anything else that you have left over should be put into savings so that you can build up an emergency fund.
Here are a couple of additional tips that can help you cut back on the amount of money you're spending on car insurance alone.
Pay your entire six-month car insurance premium up front, in one lump sum. Although this sounds counterintuitive if you're stretched for cash, it can actually save you money. In many cases, opting to spread the coverage out to monthly payments increases the cost by a small but potentially significant amount.
Sign up with your auto insurer for automatic withdrawals of your premiums. If you can't afford to pay for your car insurance premium in a lump sum, having your insurance auto-deducted from your bank account will ensure that your coverage doesn't lapse for non-payment if you overlook your bill. Knowing that a specific amount of money is deducted is also a useful tool that will help you curb your spending.
Creating a budget is a great start. But just remember, it's only the first step. The next step is sometimes the most difficult—sticking to that budget. But if you can remain committed to doing so, you'll go a long way toward pulling yourself up by the bootstraps so that you're no longer living from paycheck to paycheck.
Looking for an auto insurance policy? Contact an Allstate agent for more information.