Here Is the Money Scoop
You tell your money what to do.
Are you telling yours to go out and buy a lot of fun things? What about the necessary things? Did you forget?
You make money because it costs to live. Your expenses cover the basics—housing, auto, food, clothing, and insurance to protect you and your family.
I hope you make a little more than your basic needs. Why? Because you need to provide for and protect your future, by way of savings.
You should show interest for savings!
What Is the Value of Savings?
There are two layers of value in saving.
First, a savings account is your buffer or shock absorber for the bumps in your financial life. Without savings, the emergencies or unplanned events in your life will not be funded.
Your living expenses are funded by your paychecks. They are expected and you budget for them. (Hopefully!)
The cost of not having a savings account can be very high. Most people (including myself) have utilized credit cards to fund emergencies. And, though a car repair is not expected, you must plan for machine maintenance and repairs.
Second, credit cards or unsecured loans will add interest to your financial life, in a detrimental way. You paid for the emergency (the event) but not the funding. Credit only delays the pain. However, there is more bleeding before the wound is healed!
Credit—Heaven or Hell?
High interest on credit is hard to pay. Why?
The following month, you will have an added payment to make. So much for starting that savings account.
That is okay, you say. I will just spread the payments over several months to keep that strain on my budget from being too bad any one month.
Okay? Did you look at how much of your credit card monthly payment is interest? Does your payment cover the monthly interest?
My guess is by very little. In fact, the cost over six months will amount to 9% to 20% of the original purchase price, depending on the size of your payments.
Maybe you cannot find a high-interest savings account, but you need to calculate the cost of not having a savings account.
Save with Interest
An early goal for savings should be 3 to 6 months of living expenses. And the hope is to be able to have that money make you money.
Some banks offer a Money Market fund. The Interest varies and can be set up as a checking account.
One of the least expected options is with your insurance company. They have investment tools worthy of discussion.
Why So Much?
Did you notice I said to save 3 to 6 months of monthly expenses?
That may seem like a lot when you seem to be struggling to pay your normal monthly bills.
However, though you may not have seen a time where you could not get a job for six months, but I have. Part-time or odd jobs will not replace that regular paycheck. My credit cards went up even more!
Imagine having savings to fall back on!
Do you think you would spend as much during that time as when you had a full-time job? I think not!
That same frame of reference should be used to establish a savings account. You will need it to survive, so act like it!
No Excuses!
Live as if you will be laid off, soon. Delay buying larger items. Only shop when things that you need are on sale.
Put off buying what you want. There will be opportunities for that, later.
Get real! Start to save. Make it worth your interest!