- Personal Finance
Top Reasons To Start Saving Today
Unless you have been living under a rock for the past few years you know about the economic situation we are currently in. The unemployment rate isn’t as bad as it used to be, but it’s still not quite back to business as usual yet. Corporations are still downsizing in an effort to cut costs, the result of which is that many people have to find new jobs. It is a very stressful situation but I feel that if everyone has a positive attitude and the correct tools they will be able to find a way to get ahead with as little pain as possible. With the economy the way it is, it’s important to start a savings plan now rather than wait for complete disaster to strike. People are going to have to take a very close look at how they are spending their money and really weigh what is and is not a necessity at the present time.
Where do I begin?
Start by putting together all your bank and credit card statements for the past year. With a yellow highlighter mark all the transaction where you bought food. Using a different color highlighter do the same for all the living expense transactions such as rent/mortgage, utilities, cell phone, cable, internet, food, gas for car, car insurance, taxes and any other expenses that get paid monthly. Calculate the yearly expense for each item. You will be surprised just how much you spend a year on things like cable, utilities and food.
The next part is going to be very difficult. Sit down with family members and discuss where everyone can help out to start cutting costs. Don’t leave lights on throughout the house when no one is in the room. Keep the thermostat at 77-78 in the summer and 68-70 in the winter (unless medical conditions demand otherwise) to save on high energy and gas bills. Maybe cut out one of the premium cable channels that no one watches anyway or shop around for better prices. Negotiate with your insurance company for a lower rate.
The biggest hurdle for most families is going to be budgeting your food spending. According to the USDA the average 4 family house-hold with children under the age of 5 spends $850.70/month on a moderate food budget plan. That number gets bumped up to $1,012.60 with 2 children over the age of 5. If you are spending more than this then you need to evaluate what you are spending your money on and cut back. Cut coupons, shop only when the item you need is on sale and DON’T give in to impulse buys.
- 5 Simple savings anyone can do
Here you will find 5 extremely simple savings tips that almost anyone can do. You don't have to sacrifice everything you love to be able to put money away and I am going to show you how.
Now that you have cut back on the necessities it is time to trim your extra curricular expenses. For example, do you really need ANOTHER pair of shoes or that blouse that looks just like every other blouse you own? Obviously if your clothes are starting to get holes in them and you can see your socks through your sneakers then it is time to go shopping. There is no need to be cheap, just start thinking frugally.
Now that you have just cut your costs you have extra money to start saving!
Reasons Why You Should Be Saving
Interest rates aren’t THAT low
- An ING savings account offers 0.8% APR and you can make as many deposits or withdraw as many times as you like without having to pay any fees. While this is a lot lower then the 4.5% they were offering 5 years ago, it is still one of the highest rates without having to tie your money up in a CD or savings bond.
- If you start putting away now you will have a nice chunk of change when the interest rates go up again. And they will go up again. Everything works in cycles and the more you have set aside now the happier you will be when the rates do finally go up. 4% of $25,000 is a lot more than 4% of $1000.
Rainy day/emergency fund
- You get in a car accident and you need funds for repairs.
- Emergency hospital visit.
- Unexpected home repair such as leaky roof, broken pipes, etc…
Less stress if laid off from work
- Having at least 6 months of living expenses put aside will help your stress levels if you ever find yourself suddenly unemployed. You still need to find a new job but now you don’t HAVE to take the first one that comes around, you have some wiggle room to find a decent situation.
Big ticket item fund (House, car, vacation)
- Starting early and putting money away makes it easier to reach your goal when you are ready to buy a house, a car or if you really need to go on a vacation.
You can even have the funds taken directly out of your paycheck for less painful saving. It can hurt sometimes to see money in your checking account and then put it away and tell yourself you can’t touch it. Having a percentage of your paycheck automatically deposited into a savings account is a good way to eliminate that sadness. Also you will never forget to move the funds over and after awhile you will get used to seeing a slightly smaller paycheck each pay period.
At the end of the day it is for the individual to decide what is and what is not important to them. Having funds to fall back on is a huge help in relieving stress and can only benefit you in the future. It will take a little bit of time, but eventually saving money will be a normal part of every day life
Happy saving everyone!