Having money set aside to cover minor emergencies, funding your retirement, and knowing that if you lost your job you could still pay the bills for a few months offers the kind of peace-of-mind that makes saving money worth the effort.
Even if your income is only slightly more than your day-to-day costs, it’s possible to build up savings slowly by consistently setting aside a small amount of money from each paycheck. If you have credit card debt, you may want to split your savings between adding to your minimum monthly payment and building an emergency fund.
Experts recommend saving a minimum of 10% of your take-home pay, but if that’s a stretch, start with 5%.
According to the Motley Fool, at least 70% of Americans expect a tax refund during 2018, with the average amount being around $3,000. If you aren’t already planning to use your tax refund for bills, set aside a portion of it before you start spending.
Handling emergencies and big purchases with a credit card mean you’ll probably pay between 10% and 30% interest. Saving for those costs ahead of time makes them much less expensive. Having a savings account with a growing balance also protects your budget from unexpected expenses. Sticking to a budget is an important part of financial health, and protecting it with a savings account is smart.
The most important thing to remember when you set up a savings plan is to keep it simple. If possible, automate savings by having a percentage or set amount from each paycheck set aside. Some employers offer the option to automate savings. Check with your bank or credit union to see if they can help with this, as well.
Saving money puts you in control of your financial future. Start small if you have to. It’s a great way to start making your money work for you. Once you are used to saving money, try to reduce your spending in one small way and divert those funds to a retirement account or a special fund for a big purchase you’ve been dreaming of like a down payment for a home.
Many people don’t bother to save for their future; whether contributing to their employer-sponsored 401(k) or putting aside money for their next vacation.
Maybe you can only spare $5 or $10 from each paycheck. It’s still crucial to treat your savings plan as a priority. Even small amounts add up, and in just a few months, a $100 emergency car repair is much easier to manage than it would have been without your safety net.
Keeping some of your income to help you reach your goals, increase your peace of mind, and expanding your options for the future may mean more to you than your next little indulgence. Saving money is something you do for yourself, and if you haven’t started, now is a great time.
Looking for more savings tips? Check out our helpful guide on The Basics of Saving Money.