Everyone knows that having money set aside in savings is important, but either we can’t afford to put away money right now or we choose not to because living in the present is much more enjoyable. When you’re cold and miserable stuck in Minnesota during the coldest winter in years, you would likely rather go on a Caribbean vacation than build up savings. In this case, however, instant gratification is probably not worth it if you’re depleting all of your savings or worse - accruing debt. If you go on that trip and come back to a car that needs a repair, you might not have cash handy to pay for it…which can lead to debt.
So what’s my point? Having different types of savings accounts will allow you to have fun and create a safety net at the same time. The first step is setting up a budget to determine where your money is going and how much you have to set aside in savings.
This should be automatic monthly or every paycheck. Set aside at least $25-50 per check or per month or whatever is affordable. Your goal should be to have at least 3 months’ worth of your expenses in savings so the more you can afford to set aside, the better. This is your safety net in case of an unexpected event like a job loss. Has something unexpected already come up and you’re not sure what to do? Check out ‘How to pay for the unexpected when you’re broke’.
Chances are if you own a car you’ve either had to get it repaired or you will in the near future. If not, then you at least have on-going maintenance. The same goes for our house and even our bodies. People get sick and appliances break. So periodic savings is not an exact science, but the best way to prepare is to determine approximately how much things like car repairs, medical bills, glasses, etc. will cost. Just take the estimated total cost, divide it by 12 and that’s the amount that you should set aside monthly into periodic savings.
Savings for Fun Goals
This last one isn’t in the title of this post, but needs to be addressed. We all have certain things that we’d like to do or buy that aren’t necessarily in our monthly budget. So instead of using every penny you have for a new TV or trip, think about it as a goal instead. If you want to get away from the horrible winter weather next January and a trip to the Bahamas will cost you $1,500, then you’d need to save about $150 per month from April through next January. However, you should still keep setting aside money into emergency savings and periodic savings. Therefore, as mentioned before, it’s crucial to make sure this is realistic and fits in your budget.
Not sure how much you can afford to set aside monthly? Call LSS Financial Counseling at 888.577.2227 and schedule a budget counseling session with one of our Financial Counselors. We’re here to help you meet your financial goals and conquer your debt.
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