Having a positive attitude towards savings is one of the greatest behaviors that you can have around your finances. In basic financial advising we learn that clients should establish an emergency savings fund equal to three to six months of their living expenses.
Savings for your emergency fund is one of the most important concepts in financial advising. Too often, an individual’s finances are ruled by their emotions and biases, we often overlook the boring future of saving for a rainy day when we can get instant gratification (something now). Unfortunately, no one can predict when an emergency situation might pop up, from the car breaking down to a medical emergency of yourself or a loved one; and if you don’t have the money set aside you may have to charge the expense on high interest credit cards or shuffle other bills around so that you can get back to work to pay those expenses off. The good news is that wherever you are financially, you can begin saving in three easy steps.
Knowing and executing your personalized budget is one of the keys to your financial success. You want saving money to be fun and rewarding, as your balances increase they will become something that you can be proud of. Recognize and celebrate the milestones that you accomplish.
2) Have a specialized account
Have an account at a second financial institution that is just for your savings. If you are loyal to your bank or credit union, or if you get special pricing or discounts where you are you can even go as far as removing your specialized savings account from your online banking so that you are not tempted to move the money when the budget gets tight.
3) Move the money / make it automatic
Pay yourself first, save time and your money by making savings automatic. Set up an automatic transfer, have a separate direct deposit from your paycheck, make it a game each time you spend on something that may bring you guilt (that $8 gourmet coffee) transfer the equal amount to savings.
At first, it doesn’t matter how much you are saving as long as you start. As time goes on and you have a good handle on your savings it’s time to crank down, reanalyze your budget. A good motto I learned years ago is “save until it hurts”. Continue to contribute to your savings, in some manner, until your financial life is feeling tight. Focus on the process and the outcomes will take care of themselves.
Start your savings and let me know how it’s going.