Downsizing. Restructuring. It doesn’t matter the cause, everyone dreads the potential “Pink Slip,” and in today’s economy, it can come in more unexpected ways than ever. Hundreds of thousands of people are still looking for work, and if you could ask them, you can bet almost all of them wished they had put a little more away “for a rainy day.”
We all have a laundry list of financial obligations: mortgage, car payment, utilities, groceries. And we all know we should be saving, but how? Here are three top money saving tips to help you get on the right track to either start saving or pad your wallet even more.
Saving Tip #1 – Budget, budget, budget.
Spending what money you have wisely is the most important rule for saving. You have to know where your money is going, prioritize and make necessary cuts. But this doesn’t have to mean tedious penny-pinching and tracking every dollar; that gets tiring and turns most people off after just a few weeks. Make it simple. Sit down and figure out where your money is going: housing, utilities, groceries, bills, etc. Once you have mapped out a typical month, identify trouble spots and develop a plan to cut back where you can. The extra money you find from this exercise becomes your savings.
Saving Tip #2 – Pay yourself.
Now that you have created some extra cushion in your budget, where do you put that money? The best rule of thumb is to pay yourself FIRST. Treat savings like any other bill. Often when we’re living on a tight budget, we immediately pay bills, buy groceries, and THEN decide how much we can afford to put away. Instead, determine the amount the amount to save just like you would a utility bill. If it’s $50 a paycheck, put that money away before doing anything else. Make it even easier ⎯ create an automatic savings plan; have the money deposited to your savings account before you ever see your check. Out of sight, out of mind, and before you know it, you’ve got a nice cushioned savings account.
Saving Tip #3 – Live within your means.
This is THE most important concept of personal savings and if you master it, you are guaranteed to succeed in financial preparedness. Bottom line is if you make $1,000 and you budget to spend $1,100 . . . that extra money ain’t free! You’ll have to borrow that $100, and with it comes interest. If you can’t pay it back quickly, that interest grows and compounds. If you’re in the habit of spending this way, most likely you’ll add to that debt. See how quickly it can snowball? Build your budget to live within your means, and you’ll never have to think of paying off this kind of debt.
What ways have you found to better prepare for financial setbacks? Have your money saving plans already paid off due to employment troubles? Share your stories with us!