By Millie Chevez, Internal Relations Administrative Assistant
Saving money is one of the most important financial habits you can practice, and it does not have to be hard! Since you’ve already set your SMART goals and created your budget, now is the time to make sure saving money is part of your plan.
Saving money for emergencies is important because we cannot predict future financial needs or challenges. Having money set aside provides peace of mind and freedom, which in turn helps you be more productive and lowers stress should something unforeseen arise. The need for savings in America is real—according to a report published by the Federal Reserve’s Board Division of Consumer and Community Affairs (DCCA), 4 in 10 adults would have difficulty covering a $400 unexpected expense and 1 in 5 are not able to pay all of their monthly bills in full. If you find yourself wondering how you can save when you are living paycheck to paycheck, here are four steps you can take to put yourself in a better position to face future financial difficulties.
- Create an emergency fund: Before you save for anything else, your goal should be to save $1,000. If this seems like a difficult step, try making small changes to your lifestyle by taking lunch to work, reevaluating your cell phone plan or getting an energy audit of your home. Funding your emergency account is not forever, but in the event of a large unexpected expense such as an emergency room visit, a home appliance repair or replacement, a car repair, or the loss of a job, you’ll have quick access to some money. Ideally, once you’ve saved your $1,000 for little expenses, you will want to save enough money for three to six months of living expenses.
- Make saving automatic: Set up an automatic transfer to your savings account when you get paid. This way your savings will be taken care of first, and money you don’t see is money you don’t spend. You can start by saving 3-5% of your take-home pay and increase it to 10% once you have more room in your budget.
- Save extra money: If you receive a monetary gift, tax refund or a bonus, save that money and plan wisely how you will use it.
- Get supplemental income: Sell unused items such as old cell phones or gift cards, rent a room in your home, or consider moonlighting as a dog sitter or delivery driver to accumulate more money for your fund.
If you need more information or tips to save money, visit the financial section at the library, read online articles on finance, or speak with a financial advisor. Everyone needs to save for the unexpected. Having something in reserve can mean the difference between weathering a short-term financial storm or going deep into debt.
Read the other articles in our Four Steps to Financial Wellness series celebrating Financial Literacy Month: