No Room to Save
I know too many people that struggle with making a living, let alone building a savings account. They claim there is no room to save in their budget, if they have one.
Is that your situation as well?
I want you to stop and consider why that is and how you may be able to change your situation.
Of course, your age, skill level, education, and your place of residence will affect your opportunity to make changes. However, with work from home opportunities on the rise, that excuse is less acceptable.
Review your situation and be sure to look at all your options for positive changes. Define your income as adequate or inadequate. Meaning, do you need to look for a second job or a higher-paying job or work with what you earn now?
Define your living expenses, your basic needs. That excludes your purchases for things you want, like fancy coffee or fountain drinks. Water is a necessity, but you can filter it instead of buying it in bottles. Then, you may be spending money on fun things like travel, concerts, sports, etc. The list goes on and the credit card ads are the first to tell you that “you deserve it”.
If you are spending beyond your basic needs, that range of spending is your first option to create some savings. Be honest with yourself as to your income and expenses. This can be harder to do than it sounds.
Work on Income
Regardless of your mental or physical limitations, you should define work as what you are willing and able to commit to doing. Consider self-employment as well as employment. Then, look at public as well as private sectors of the economy.
If you want to work in the public and non-profit sector, which would include government agencies, you need to be aware of the limited income potential with the fact that your pay comes from tax collections and donations, which determine funding decisions.
The greater potential for income lies in the private sector, where profits define how many get hired. Then, the question is how can you contribute to their profitability? That is higher-level thinking than just “looking for a job”.
No Guarantees
The saving mindset from the past is a good one to use in your future financial planning.
In construction, workers must work while the weather is dry. When it rains, most outside work or access to buildings, etc. are limited by wet soil, which limits the availability of work. Thus, we hear of the expression “saving for a rainy day”.
Farmers have related concerns about income since they must wait for months to reap a harvest. Hope they had saved enough from last year to pay for seed, fertilizer, fuel, maintenance, and food to carry them until harvest.
No job has a continuous guarantee. Work while you can and save for when you cannot.
I read a magazine article years ago that made sense to me. I forgot the author, but the concept stuck with me. They suggested that you work to establish two or three sources of income. Hopefully, when one source of income declines the other will increase. Seasonal work can be like that.
Consider some form of self-employment to supplement a job income but allow time for rest. Your health is important to maintain for future income!
Putting Controls in Place
My definition for debt is unpaid spending.
However, I recognize that with some needs such as transportation and housing debt seems unavoidable. But I must raise a hard question, could the debt have been avoided? Such as buying an older vehicle or a smaller home or just renting an apartment.
You must ask yourself if the price of appearance is worth the cost? When the cost of debt (interest expense) is added to the cost of the purchase, you may add 50% or more to the cost, with the element of time in paying off the debt.
Paying in cash is a form of saving when compared to the cost of credit. So, avoid using credit when you can.
The most recognized form of putting spending controls in place is the personal budget. And, while you may set limits, without details, those limits are difficult to keep in mind. Tricks such as only spending cash set aside in an envelop by category each payday can work until there is an “emergency”.
Properly used, a budget can help you identify your basic needs. Then, beyond your basic needs, you must justify your spending to allow for putting money into savings for the “emergencies” and to avoid debt.
Set Goals to Encourage
If you can pay down debt ahead of schedule and put at least 10% of your income deposits into a savings account, your concept of money management is getting better.
But do NOT get lazy! To be debt-free is a worthwhile goal, along with establishing a savings account that would cover at least six months of living expenses. Then, losing a job would be less of a concern and you could sleep better than most!
If you are struggling between paychecks, then, obviously, you will need some time to reach that goal. However, the goal is worth reaching for!
Goals that you expect to take more than a year to achieve need to be divided to mark your progress. Each sign of progress should be celebrated as a sign of encouragement!
Changing habits is what you are trying to do. And those changes may take longer than expected, depending on your focus and understanding of what needs to change.
Review your goals often and measure for progress and make time to improve your understanding of what you need to do.
Be Aware of Obstacles
We like to budget as though all will go smoothly. However, if you have appliances or vehicles, you can expect maintenance expenses, often when you least expect it.
The best plan is to have a savings reserve with enough to cover those unplanned repairs. A reserve of about $1,000 should be enough to cover most repairs. My own observation is that trouble can come in threes. So, a reserve of $3,000 would be much better!
Make Recovery a Priority
If you must use your savings to cover an emergency or are in the process of building an account, please make it a priority to build your savings balance back to your goal level.
Make restoring the balance of your reserve a goal with the highest level of focus!
Stress or Peace of Mind?
My own experience with debt has been the stress of buying things that I cannot pay for. Credit card companies are willing to give you more credit than you deserve, because the interest that you pay will usually amount to more than you purchased before you get it paid off or file bankruptcy.
Can you see that I have a problem with the system that allows credit to be given beyond the ability to pay?
I do know that getting debt paid off and being able to add to savings creates a much more peaceful state of mind!
Enjoy the Difference
When there is a sizeable positive difference between what you earn and what you are obligated to spend, then saving and investing can become a reality.
Then, you will realize a saving mindset!
Accumulation can begin.
You will begin to see interest income not interest expense.
Then, compounding can multiply your earnings on savings and investments, which is a beautiful thing!
Enjoy the difference that makes!