Everyone should be saving at LEAST 10% of their income, however many people spend every last dime and then some.
Having a cushion of savings equaling 3-6 months of living expenses is extremely important for everyone. Unforeseen events such as job loss, illness and injury can be disastrous and can leave you in financial ruin that can take years to climb out of...if you're unprepared. If you're thinking to yourself that you can't afford to save 10%, then you need to be saving it more than anyone! Saving money takes time, effort and discipline but you can do it and the following steps can help.
1. Make saving automatic. You can start an automatic savings plan with your bank where they transfer a specified amount from your checking to your savings on dates of your choosing. You can also make the same arrangement with an online bank which tends to offer higher interest rates than traditional banks. Some good options are http://www.emmigrantdirect.com/ and HSBC's online banking service.
2. Set yourself a limit for how many ATM withdrawals you will make and for how much, then stick to it!
If you know that the cash you have on you has to last till your next planned ATM visit you will find yourself spending your money smarter and making less frivolous purchases.
3. Subtract credit card purchases from checking account immediately so you're prepared for the bill.
Credit cards are a form of financing. Whenever you use a credit card and carry a balance, you are taking out a high interest loan. Why would you finance groceries and gasoline outside of times of desperate financial hardship. Charging day to day purchases is fast, convenient and allows you to go about your day without walking around with wads of cash but pay the balance in full at the end of the month and only resort to financing charges in emergencies and irregular large expenses such as car repairs and the like.
4. Avoid impulse buying! Give yourself a cooling off period before making purchases, the larger the purchase the longer the cooling off period should be!
If you give it some time and still can't live without it, then by all means treat yourself.
5. Spare change adds up! Put all your spare change in a jar at home or at work and then deposit it in your savings account when it gets full.
Loose change is something that many of us don't even make note of and you're not going to amass a fortune saving it. However it is painless and effortless to save and when your container is full, the cash will feel like found money.
6. If you're a nonstop shopper, it's time to stop! Reward yourself every time you pass up a purchase no matter how small the purchase is (hey, lattes add up!), put the money you would have spent in a clear jar somewhere where you can see it on a regular basis. You will impress yourself as you watch it grow.
7. Once you have finished paying off a credit card or loan keep making payments into your savings, investment or retirement account. People always claim to be low on funds available for saving and investing so take the opportunity to put some freshly freed up cash to work.
These steps are simple, practical, ans they work! Hopefully you will incorporate them into your daily life and it won't take long before you see the benefits of saving money and spending smart.
Yours Truly,
Finance Girl
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