Eps 1: Here Is What You Should Do For Your Money
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Host
Gail Sullivan
Podcast Content
People need to have some kind of cash savings to fall back on in an emergency. Having cash saved up for emergencies keeps you financially secure, and helps you sleep better at night. Just be sure that your savings vehicles rules allow you to access your savings quickly if you need to.
Keeping these savings in a bank account means that you have easy access when needed, but also means that you have lots of money sitting in one place, deteriorating at the rate of interest. It turns out that keeping too much money in a bank is a possibility, and keeping all of your savings in it could actually harm your long-term financial goals. Stuffing cash into an emergency fund, let alone an initial home down payment, a retirement nest egg, or your kids college costs, can require years of consistent savings and an enormous dose of discipline. Saving money and putting personal finance tips into action can be difficult.
Heres how to save, from changing everyday habits, negotiating bills, and making lasting changes. If you would like to read more about saving money through coupons, freebies, and home-made hacks, see our frugal living guide. If learning to manage your money sounds intimidating or stressful, tackle one step at a time.
With work and dedication, you can master money management with confidence. When you are managing your finances well, life might not be easier, but you will have more time to focus on the important things in your life. Managing your finances properly means that you can devote more of your time and money to causes that you care about.
Setting aside time or money for donations can help you have an impact where you want it. Even if you are limited in what you are able to invest, making a small investment in your investing accounts could help you leverage the money you make into a bigger return. Even if your contributions are small, a nest egg could spare you a dicey situation where you are forced to borrow money at a higher interest rate, or perhaps you will not be able to pay bills on time.
You should also consider building up a emergency fund, that could cover 3-6 months of living expenses. At the very least, it is wise to have at least three months worth of living expenses saved up in your emergency fund; six is even better. Many experts recommend saving between three and six months of expenses in your emergency fund. If you work in a stable profession, are healthy, and live in a region where the cost of living is lower, you can probably get away with saving a smaller amount--only three months worth of expenses--in your emergency fund; if you have the potential for bigger expenses in the future, it might make sense to stash a larger amount.
While emergency funds are meant for bigger events, such as a loss of employment, we recommend saving a percentage of your paycheck for smaller, unexpected expenses, too. One way to simplify money management is to keep the money designated for bills and budget expenses separate from your emergency fund. The best way to accomplish this is to set up a separate savings account at your bank or credit union, which you will name as your emergency fund. Others may choose to set up an IRA, which allows you to take a certain amount each month out of the savings account and deposit it directly into the IRA.
It is good practice to set aside a little bit of money aside for the occasional expense, that way you are not tempted to dip into your emergency fund, or be tempted to cover one by adding on an existing credit card balance. If you are paying the full balance on a credit card each month, and getting points or cash back on purchases, using your credit card for the occasional expense can make sense.
Paying down high-rate debt is one of the best investments you can make, and the average 17% interest rate charged on unpaid credit card balances is a major barrier to building financial security. If you have a strong credit score, you might want to see if you qualify for a balance transfer agreement with a new card that waives interest payments for the first time. If you have some extra cash for bills, pay down the highest-interest debt first.
Reductions can probably save you $150-200 per year in interest, or a lot more if you are paying penalty rates at 20-30%. Even cutting a single, unneeded expense from your budget by only $20 could result in $240 saved over a year. Also, keeping recurring monthly expenses to the minimum can help save you significant amounts over time. Use your monthly spending habits, along with your monthly take-home pay, to create a budget that you know you can stick with.
We love the 50/30/20 budget plan, which devotes 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment. This plan generally involves a combination of budgeting and savings, debt avoidance or reduction, and investing for your future. We have analysed hundreds of scenarios in order to produce a savings and spending guideline that could help individuals build up sufficient savings for retirement. Analyzing your spending and savings now, according to our 3 categories, can provide you with a sense of control - and certainty.
It will only take some time and effort to bring your money under control. While it will require a commitment of time, you can expect to save thousands.
You can use your short-term savings to replace a dishwasher, repair a cars timing belt, pay off a big insurance deductible, keep yourself afloat while between jobs, and put a down payment on a house. Your short-term savings could get used for a vacation in Aruba, buying holiday gifts, or paying taxes. If you have got over six months of savings in an emergency fund and have a lot of money saved up for short-term financial goals, then start thinking about investing.