For many of us, we don’t feel like we have enough. Some may be living “paycheck to paycheck” – others may have at least some reserves set aside. Some may not know how much to save. Or where to save it. We look at the present and wonder why we haven’t saved more. We look to the future and wonder if we’ll be able to cover the unexpected.
We yearn for stability and knowing that we’ll have things covered when we need to be able to cover them. Sometimes though, we don’t feel like we know what we need to do to build up a rainy day fund or set money aside for the unexpected, or even a vacation.
Here at Trevi, we are hoping to encourage our readers this week on the savings front. We hope that some of what we share will resonate with you and maybe even given you some encouragement or a few ideas as you think about your personal finances.
Setting some money aside every month is important to help you work towards some level of financial stability and be prepared for the unexpected. Initially, we aren’t even talking financial freedom, rather we are talking about working your anxiety level down about your personal finances. We’ll save financial freedom for other days.
When something unexpected comes up and you don’t have the money in the bank to cover it and you are forced to “put it on plastic” life can quickly become unsettled and stressful. Saving is critical to help you build towards a day when you don’t need to “put it on plastic” simply because you don’t have the money. Life is stressful enough – savings helps you cut back on some of that stress.
Another important reason to save money to cover the unexpected? Just “putting it on plastic” is really expensive if you can’t pay off your credit card balance every month. The interest charged by credit card companies is very costly to your longer term financial health. So don’t live to pay the banks, let them pay you!
How Should I save money?
The best way to go is through automatic savings. This article describes some available options.
Where should I save my money?
We recommend a high interest rate online savings account. If you don’t have an account, check out our comparative rate ads on our website. Full disclosure: Be aware that we will make a small commission if you open an account through one of these ads, but you still get the full interest rate and all the benefits available from the bank you chose.
How much should I save?
As much as you possibly can! Eventually you should be investing your extra money – but it is critical that you have a cushion first in your savings account to cover the unexpected. If you have very limited savings today, the key is to get the ball rolling. We recommend that you aim to save an amount equal to 6 to 12 months of compensation – but that’s a goal. For more on goal setting, go here. Wherever you are right now, just start. Even if it is only a few dollars a pay period or per month, it all will help you build towards financial stability and eventually freedom. And don't forget the beauty of compounding interest.
It doesn’t feel like I am getting anywhere, help??!!
We hear what you are saying. Building your finances takes time. There is no overnight quick fix. If patience is a learning edge for you, that’s ok! Over time, make savings a regular discipline. It will get easier. We promise! The key is you want to get in a position where you have more money coming in every month than you spend, and that you have a growing cash cushion. As you get your hands around this it will feel like forward movement.
Don’t despair if it is hard at first! We’ve all been there. Find a friend or a mentor who can encourage you. Follow a few blogs on personal finance – we hope you will follow ours (and subscribe to our email list). Know that you aren’t alone in your journey to financial stability – you will eventually get where you want to go! Just be patient and persistent.