You may be wondering how in the world you are to save when money’s so tight, but I assure you it can be done. It never was more apparent than now how important it is to have a cash reserve in the event of a job loss, a decline in business, and/or a decline in investment values. So, let’s talk about saving (I hear it’s back in vogue).
Saving is all about delayed gratification; something most of us struggle to master. In an age when a click of a computer mouse gets you all the information you may desire, delaying anything seems unnatural. You must make a deal with yourself that although your current self may feel neglected, it’s your future self you’re caring for. Saving is the choice to care about tomorrow’s needs. Although tomorrow isn’t promised to any of us, it sure is nice to know that, if we’re here, there’s money to buy us food, clothing, shelter etc…
The best and easiest way to save is automatically; through payroll deduction, direct deposit etc…once the money is in your hands, you’re more likely to spend it. Create a system that forces you to save and then – even though you may feel that tug and pull of things that want you to buy them – you won’t necessarily have the resources to act on those feelings. (Note: Don’t buy it on credit then, you’d be defeating the purpose!)
It helps to know what you’re saving towards; having a target helps you aim for it and keeps your focus on your goals – then you’re less likely to be distracted by day-to-day desires.
The first thing to save towards should be an emergency reserve; at least three-to six month’s worth of living expenses in a savings account. After that has been satisfied, decide what it is you want to set your sights on. It could be a vacation, a home, a college education, retirement or some other special purchase such as a car, a painting, a piece of jewelry and so forth. Keep little reminders -such as a picture- of your goal item close by.
There is so much media attention focused on investing but you should not invest unless and until you have enough cash to meet your living expenses.