Save
Likely lurking somewhere in your past (or present) is a grandmother who
nagged you about saving money. Perhaps she didn’t nag. But at the very
least she probably counseled, advised, suggested, instructed, and just plain
told you to save.
For most children, the future is tomorrow morning. But for the savvy saver
who listened to grandmother, the future is that rainy day when you need cash
but your current income isn’t enough to cover the unexpected downpour.
You can be certain a rainy day will arrive; you just can’t be certain when.
Just Save It
You can find as many ways to save as you can to spend your money. And no
matter how much your paycheck increases, you’ll probably have no trouble
finding more things to buy with the extra money.
So what’s a hard-working gal or guy to do? Follow these two rules:
- Rule #1: Just do it
- Rule #2: Pay yourself first
You can’t spend what you don’t have. That’s why you set aside a portion of
your paycheck each month and then spend what’s left. If you find this concept
painful, play a game with yourself. Tell yourself that you’ll just try it for
a month or two.
Some folks call this strategy, “Set it and forget it.” First you set it, and then
you forget it. And soon you’ll be on your way to feeling smug about that tidy
sum in the bank.
Decide Where to Put that
Rainy-Day Nest Egg
Common advice from financial gurus is to sock away an emergency reserve
of three to six months worth of living expenses in easily accessible savings.
That way you won’t put yourself in a bind by having to ask Uncle Henry for a
loan (yikes!) or by borrowing too much on credit cards when a budget crisis
crops up. Even worse would be to liquidate a long-term investment account
such as your 401(k) or an IRA (which will cost you not only income tax on the
amount withdrawn, but also a 10-percent penalty!).
Your reserve account should be:
- Readily available on short notice
- Relatively safe
- Earning interest or dividends
You could put your dollars in a piggy bank. But a piggy bank doesn’t pay
interest and, let’s face it, those piggy banks are so cute and easy to raid!
Instead, put the money in a bank money market account or money market
mutual fund. Have your credit union or bank directly debit your paycheck or
checking account before you have a chance to spend the money. The bank
will be delighted to do it, and you’ll get excited seeing your rainy-day fund
grow each payday. You’ll also be able to heave a sigh of relief (rather than
cringe) the next time an unexpected expense comes up.
