The only way to long term financial stability is to put money away somewhere for the future. You can call this savings account whatever you want: Emergency Fund, Rainy Day Money, Retirement. . . Guaranteed the day will come when you will be glad it's there waiting.
If a personal savings plan (in addition to a 401k or IRA) is not part of your current budget and seems absolutely impossible, take heart. Everyone feels this way! It almost doesn't matter how much money you earn, you can easily spend it all. We've all learned that if you make more money, then your bills automatically go up by at least that same amount. I think it's one of Murphy's Laws.
To stem this tide, you need to set your personal savings plan like any other BILL THAT MUST BE PAID. Pay yourself -- every month, or every paycheck. My husband often tells of our first experience with this. We decided (after being married for many years) to have $100 electronically removed from our checking account every month and put into a money market account. We both almost hyperventilated after setting it up! Could we really afford this??? Would we have to transfer it right back within seconds of having it taken out? Maybe you feel those same fears.
But guess what? The $100 came out the next month and we still paid all of our bills. Whew. And it happened again the next month and the next month. It was magical. And easy. Unbelievably, we didn't really miss it. Most budgets (even tight ones) have more wiggle room than you think.
After a few months, we sucked in our breath again and increased the amount to $200. Same thing. We didn't miss it. But we did love watching that money market account grow bit by bit each month. That gave us some serious endorphins to keep going.
After a year, we decided to really ramp things up and increased our auto-withdrawal amount to $1000! Surely this would kill us. But it didn't. We survived and paid all our bills.
Start small. But start. I'm not saying you need to do the same amounts we did, but try something. Call your bank or get online and set yourself up for an automatic withdrawal to some kind of safe savings vehicle (CD, money market, savings account. . .) and watch your stress level go down as your personal savings goes up.
This is what's called "Getting Ahead."
1 comment:
I'm going to go one step further and suggest that not all of the savings go into one account or even one type of account.
Every month: Some goes into a regular savings every month. This money is for emergencies only. Another amount goes into a money market account. We can get to this money in about 10 days, if we should absolutely have to have it. Another amount went into our IRA (sadly, we had to cash out in a major emergency), and another amount went into a profit share which has rolled over into an IRA type fund.
These amounts don't have to be much (although some accounts might have a minimum deposit), but it will surprise you how fast they add up.
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