Saving your money is essential to breaking the living paycheck to paycheck cycle. If you are saying to yourself “How can I save money, when I don’t have enough money?” I am sure there are some things that you can do to cut back on your expenses and start saving. If you need advice on how to accomplish this, I suggest reading some of my previous posts. They will help you to budget and find ways to live within your means.
Have you ever heard the phrase “Pay yourself first”? It means before you pay any of your bills or spend any of your money, put a portion of your income into savings. It is very important that you save for retirement, but in this post I am going to focus on money saved outside of your retirement funds. Rule of thumb says that you should save 10% of your pay. Overtime you want to accumulate savings that is equal to at least six months of your net pay. Six months of your net pay should be able to help you maintain your standard of living in the event that you lose your job or source of income. When I first read this advice, I figured this information was for people in good financial situations but for me it seemed unrealistic. Over time, I realized that this was even more important for people just like me. I was a single mom and had many years before I could even begin to think about my retirement. If I lost my job, I needed a way to be able to support my daughter and myself other than relying on an unemployment check which would only provide 60% of my pay.
Dealing with finances can seem overwhelming because we have a tendency to want to see results immediately. Saving should become a habit. It should be looked at as an exercise that you continuously practice. Working towards goals takes time. Even if you aren’t in a position to save 10% of your income, you can save something. Maybe it is only 5% or just 2% in the beginning. When either you increase your income or decrease your expenses you can begin to save more.
I suggest setting up a savings account that isn’t easily accessible. This will prevent you from carrying out an impulse to tap into it. If you have direct deposit for your paycheck you can have your employer deposit a portion of your pay into the savings account. Or, you can authorize your bank to make monthly automatic deposits into your savings account. This is another measure that will make it easy for you to put the money away without any interference.
It is important to have a “rainy day” fund but savings can also be used to make large financial purchases. Visa, MasterCard and Discover would try to convince you otherwise. They would tell you instead of saving, use them. Many Americans do just that. The average American household has over $15,000 in credit card debt. That debt has interest accumulating daily. If only the minimum payments are made it will take several years to dig out of that hole. When you use a credit card, you end up paying an amount that would have scared you if it was on a price tag.
As Americans we have moved away from saving because we fall victim to instant gratification. That pretty much means we want what we want and we want it now. However, this causes havoc on our finances and can have a major impact on our lives. Saving is not just a good thought, or something that only some people can accomplish. It is key for everyone in establishing a healthy financial outlook. I strongly encourage you to create a habit of saving and practice it throughout your lifetime!