Saving money is one of the single most important steps to achieving most of your financial goals in life and becoming financially sound. The sooner you begin to save, the better of you will be. Having a savings in place can also serve as a form of protection during a financial crisis such as job loss, unexpected medical expenses, death of a family member, etc.
A savings serves as your cash reserve or safety net when you need it. The key is to have it in place before the need arises. At the core of building adequate savings is debt avoidance.
You should try to save a minimum of 10 percent of your take home pay in addition to your retirement planning contributions. If you do this on a regular basis, you will become used to it and accustomed to living below your means. If you are able to save more then 10 percent, do it!
Also, you have 3 to 6 months worth of expenses saved up as your emergency fund. This amount includes all expenses, fixed and unfixed. For example, if in January you spent a combined total of $2500 on your mortgage, car loan, home utilities, insurance, food, credit card bill, and other expenses, then you would need to save three times that, or $7500 at the minimum.
Unfortunately, most people live paycheck to paycheck with little or no savings. Work to build your reserve as fast as possible. Consider automating your savings. Most payroll providers provide an auto transfer feature directly to your savings when you get paid.
Start saving as early as possible. The amount doesn’t matter in the beginning. Just start some place and be consistent. Condition yourself into not missing or needing that amount. Over time, your savings will grow due to your diligence. View your savings as another bill that has to be paid. Once you pay off a line of credit (car note, credit card, or mortgage), continue to pay that same amount toward your savings.
Before you know it, you will have the protection you need on the event of an emergency. By building your savings now, you will have a larger nest egg available when you need it.
DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org.
