|PAY YOURSELF FIRST|
|Posted on: Apr. 03, 2017 in Debt, Money|
For many, as fast as the money comes in, it goes right back out again. It’s not an uncommon problem. This is due in large part to people becoming over-extended financially. This over-extension, owing more than you can pay back each month, is sometimes due to frivolous spending but is more often a result of an unexpected expense, loss of a job, or some other catastrophic event that set a person’s finances into a tailspin.
The Federal Reserve recently noted that almost half of all Americans do not have enough savings on hand to cover a $400 emergency. What’s scary is how easy it is to find yourself in one of these situations: the car breaks down, an emergency vet visit, a kid needs stitches, your refrigerator quits. In fact, many of these scenarios could cost well over $400.
Getting out of the cycle of never being able to save because your money never lasts can seem impossible. The best way to do this is to build up an emergency fund so that when the next crisis hits, you’re prepared. Many will protest, saying they would build up an emergency fund if they had anything extra to save. If this is you, we have a strategy that can help you reach your goal of an emergency fund even when you don’t think you can.
Pay yourself first. It’s that simple and that hard.
Millionaire and best-selling author David Bach recommends saving one hour of your daily income. He goes on to say that the average American is only saving 25% of that amount, if anything at all. He says if you want to build real wealth, you must save some of your paycheck for those expenses you’re not expecting so they don’t blow up everything you’re working so hard for.
If you can’t save one hour a day yet, that’s okay. Start with whatever amount you can today. Set up automatic bank transfers or ask your employer to split your paycheck between your savings account and your checking account. Get your money into a safe place where you will not touch it – before you are tempted to spend it. Once you get into this habit, see if you can increase what you put into savings first until you reach that one hour.
If you want to get in front of these expenses and have cash available to cover life’s curveballs, you’ve got to be honest with yourself and look for the holes in your budget where you’re spending on things you simply don’t need. Of course, everyone deserves a treat here and there, but if you’re treating yourself on the regular and you don’t have that emergency fund, you’re only hurting yourself in the long run.
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