The following staff post is by Miss T.
Do you spend everything you earn?
Then you have something in common with the majority of people. Most people spend every cent of their income and have made no provision for saving. Household saving rates fell below the one percent mark in 2007 in the US and are still among the lowest in the world.
Failure to save really does lead to financial disaster and is one of the major reasons why people struggle to survive. Each person has a choice about how they live their life; it is vital to make saving a top priority.
No one can predict the future; we never really know what’s around the corner and down life’s road. It could be that everything will be rosy but that is really an unrealistic expectation. Financial difficulties happen to nearly everyone on the planet at some stage; the best we can do is take action to limit the effect.
So if having some savings is so important, why do so few people have any? We live in a consumer-driven society, constantly being tempted in every type of media to buy the biggest, the latest and the best. Is it any wonder so many people are guilty of over-spending and under-saving?
Do you worry about being able to pay your bills? Do you get to the end of a pay period and wonder where all the money went? Do you suffer anxiety, stress or lose sleep over your finances?
Let’s look at how saving part of every pay check will ease these worries and allow you to get some sleep at night.
If you lost your job or were unable to work for a while, how long would you be able to manage? The majority of people admit that they would be lucky to have enough money to last a month in this situation. No wonder stress is affecting so many people!
The #1 rule of financial security is to always put some money aside as savings from every pay check. Think of this as paying yourself and always pay yourself first. The easiest way to do this is arrange to have your savings amount automatically transferred to a savings account each pay day. What you never see, you won’t miss but you will have the peace of mind that comes with having some back-up funds.
Now, this amount you’re saving is not for retirement; you need to have specific retirement account for this. Neither are these savings your emergency fund; that should be a separate account to pay your living expenses in case of an emergency. While you need both retirement and emergency accounts your priority should be to save enough as a back-up for when bills come in and life’s little unexpected surprises occur.
“How can I save anything when there’s never any money left over!”
Ever heard yourself saying this? It’s the most common reason people give for not having any savings.
When you create a budget, you will know how much money there is for everything you need to pay for. If there’s not enough to go around, you either need to earn more money or cut back in spending somewhere. These are the only two choices you have; relying on credit to make it through the month is definitely not an option. This is where so many people fail; they use credit cards to try and make ends meet but this practice only gets them deeper and deeper in debt.
So, savings becomes one of your expenses in your budget but an expense you will be glad to have. You will also be saving the amount you need to put aside from every pay check for occasional bills and expenditures like annual insurances, vehicle expenses, gift buying, home maintenance etc. A well-planned budget drastically reduces the risk of financial problems and worry. When you know everything is accounted for, worry is taken out of the equation.
Saving towards a goal is a great way of getting results. If you have a plan, you will be more motivated to do whatever it takes to achieve the goal. Open a separate savings account for holidays, a new car, a new kitchen or whatever you want.
Controlling spending is the other side of the coin in creating savings. With so many people living from pay day to pay day, this is often the only way to find money for savings. It is often the little things, the frivolous things, that eat away at our money. It is important to identify the things you need, from the things you want or would like to have. It is in the area of spending on ‘wants’ that savings can usually be found.
Sometimes, the decisions we need to make, in order to be able to save, will be difficult ones. When people have become accustomed to a certain way of living, making changes can be hard. If you are severely over-stretched, you might need to consider down-sizing your home and car or moving to a cheaper area. But it’s better to make those tough decisions before your financial situation gets any worse.
Having a back-up of savings helps reduce financial stress and gives a cushion against financial disaster.
So, do you have a back up plan?