Welcome back!
It is the start of a new week, so let’s try to get off to a great start. Today, we will talk a little bit about some savings strategies. It should go without saying, but what we will discuss here is just the tip of the iceberg and should not be construed as financial advice. If you want or need financial advice, please find a financial advisor or planner near you. It is my hope that this information will only boost your confidence when you do discuss your finances with a financial advisor.
So, what are some savings strategies? Finding a strategy should not be too difficult, a search online will reveal countless strategies, but you will have to make sure that the strategy works for you and your lifestyle. So let’s start with a common strategy, saving for an emergency fund. This is a sum of money that you set aside and only access when there is an emergency. You should figure out what balance is the best for you and your lifestyle. Some suggest saving about three to six months of expenses into this account. The idea here is that three to six months should help you find a new job if you get laid off or quit to pursue something else. This strategy might be quite difficult for those of us that do not make a lot of money, which can make it feel like an eternity to reach that goal.
Another strategy or goal for your emergency fund can be to follow advice from Dave Ramsey. Ramsey suggests saving $1,000 into your emergency fund and then begin working on tackling your debt. Check out Ramsey’s site here: How Much Should I Have in Savings?. This is a great idea because it gives you the ability to progress quicker in baby steps to get to a point of financial freedom. Ultimately, your emergency fund goal will be dependent on you and your lifestyle. If you can put away the Cheerios and go for Toasty-O’s for a few months, take that into consideration when calculating an emergency fund balance.
Another strategy that you can implement is saving money via a payroll deduction into your savings account. This means assigning a specific dollar or percentage of your net take home pay to go into a different account that is not your main checking account. This might help you save more money than you realize because it is essentially money being saved without you intervening and moving the money from account to account. This might allow you to be a little more “hands off” with your savings strategy, which is fine because this strategy suggests that you will be saving forever or at least until you get a new job. If you are building out your budget, I would recommend including this in your “Total to Me” line though because it gets you in that habit of budgeting to pay yourself.
The next strategy is another mindset adjustment, are you seeing a trend here? This strategy suggests that you treat paying yourself like you would any of your other bills each month and budget that amount to you. I know that we discussed this previously, but it warrants further discussion. This strategy could involve writing a check or wiring money to another account of yours or even withdrawing the money and storing it under your mattress. Whatever works best for you. With this strategy, you start seeing your finances like a CEO would their business.
Another, more complicated layer to this strategy is to pay yourself first, which means pay yourself before you pay your mortgage/rent, energy, insurance, etc. This layer comes from Robert Kiyosaki’s Rich Dad Poor Dad. The idea is that paying yourself first would incentivize you to work harder and earn more money to pay off your debtors when they start calling you to pay their bill. This can be very difficult for the average person to achieve, especially for those of us working full time for a low wage. This is likely one of those strategies that will require you to get a “side hustle” to help meet your financial obligations.
You might be reading these strategies thinking that they all suggest everyone has disposable income that they can just point to a savings account. That could not be further from the truth. The point of discussing these strategies is inform everyone that different strategies exist and by learning them, you can find one that works for you or fit one to your lifestyle. Dealing with personal finance is often a mindset. If you have a negative mindset on your finances, it will be difficult for you to visualize a place where you can actually save money. That is fine, but at your convenience, take a step back and view your life from 40,000 feet. Notice where you started in life and notice where you are now. I hope that you might realize that you are special and have come a long way. You can do this; you can save money. Start now, find a way to saving something that fits your lifestyle. Again, think about avoiding the Cheerios and go for the Toasty-O’s for a few weeks. If you are paycheck to paycheck, look at your expenses and try to find a line that can be changed to allow you to save more money.
Let’s get to work and find a strategy that works best for us – even if it is saving up to $1000 and then attacking your debt with ferocity.
Disclaimer: I am not a financial advisor. The content on knowxchange.com or “this site” are for educational purposes only and merely cite my own personal opinions and experiences. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!