I think it is so important for me to talk about this during this economic uncertainty. If you talked to me a year ago, I wouldn’t of had any emergency savings, let alone a personal finance problem. I’d still be sitting on credit card debt with a bank account that would disappear at the end of each month.
Emergency savings are important to have. I’ve never really been a big spender myself. I typically left money in my bank account, but it was never “savings”. For it to be savings, it must be put in a different bank account. It has to be separated from your day to day account or it will end up getting spent.
Obviously, we don’t always have lots of money sitting around each month and that maybe an excuse not to save. Everyone can save if they really want to. It doesn’t matter if it is just $50/month. It should be saved. Sell some stuff on eBay if you have to, just to generate some more money for your savings.
I know this can be a bit tough since we want to spend our money. I think it is important to make a game or challenge out of it. At the end of each month, I calculate my net worth. For most people, this number doesn’t mean a thing to you. It didn’t mean a thing to me when I first started doing it. But I noticed that each month I started thinking about it. I started to think about what I was doing with my money. Was I using it in a way to increase my net worth or was I just wasting it?
As you can probably guess, this turned into a competition. Each month I wanted to make sure my net worth was improving. That means money was going to pay off my student loans and my emergency savings were growing. It’s really an amazing feeling having this happen.
When I first started with my emergency savings account and put my first $100 in it, it looked so small. I could see the account balance online and it didn’t seem significant. I just kept adding to it each month and it started to grow.
I’ve been sort of lazy, but I need to actually get this money put into a high interest savings account. You don’t actually want to have it locked into something like a bond. You want the money to be very liquid. Liquid means as close to cash as possible.
Basically a high interest savings account is what you want. It’s liquid and it has a pretty good interest. If you’re earning 4%, that means $1000 will earn you $40/year. Doesn’t sound like much, but you might as well be paid for saving.
Save your money. Don’t be some moron that is one pay check away from failure.
Tags: Finances