The road to financial independence can be intimidating, but not if you know where to start. Saving money can often be a challenge. We’re wired to take care of our needs now, and worry about later… well, later. However, saving money is a critical component of financial wellness and will start you on the right path for a financially independent future. Saving (even a small amount) can make all the difference.
Putting aside a set amount each month helps protect us in a financial emergency. Perhaps it’s a surprise medical bill, car repairs or temporary loss of income. An emergency fund is critical to help handle unexpected expenses. This strategy is better than using high-interest credit cards or taking out a loan. An emergency fund gives you peace of mind and prevents you from going into debt.
For those anticipating large upcoming purchases, saving money can help us prepare our budget – such as a down payment on a car, home improvements, an upcoming vacation or even ongoing costs for your pet. By saving up for planned purchases whether they be the significant expenses or lower cost items, we can avoid using high-interest credit cards or taking on other debt. When you plan ahead, you take control of managing your monthly income.
Financial stress is real. It can be overwhelming to have bills and expenses that we struggle to pay each month. In fact, many researchers see a significant connection between financial stress and mental health and well-being. During the pandemic, financial strain is felt by the newly unemployed, furloughed and those still working but facing an uncertain future, when you build up savings, you reduce the stress many of us feel about our finances and give yourself a gift – peace of mind.
Gaining a sense of freedom might not be the first reason that comes to mind as a benefit of setting up a savings plan. Yet many people enjoy a sense of improved freedom and flexibility after building up savings, no matter the amount. Setting aside even $20 a paycheck is proven to provide a feeling of freedom due to the “buffer” savings gives you. Knowing that a savings “nest egg” exists gives people more freedom to choose how to handle their finances, rather than feeling stuck in a particular situation.
Use a budgeting worksheet to get a handle on your monthly income and typical expenses, including credit card debt and other loan payments. GreenPath Financial Wellness, a Marine Credit Union partner, has a plethora of great tools to help you get started with your budget.
Consider how much you can set aside each month to build up savings. How much you set aside will depend on your financial goals. For a large purchase, break down the amount over a 6- or 12- month period and automate savings to meet that goal.
Automating savings makes it more “painless.” You’ll be able to set it and forget it, by paying yourself first through automated deposits.
ensure you’re maximizing the interest you’re earning by getting a competitive annual percentage yield (APY). Consider a money market or other higher interest account.
Setting a savings goal with loved ones lets you come to a consensus about goals and dreams. That way, it is easier for you all to plan and encourage each other to save for emergencies, planned expenses and other goals.
Planning for the even LATER is so important. Statistics prove that starting to save as early as possible, results in more money for you in your later years. Does your employer offer a retirement match? Take advantage of it! Find a local financial advisor to talk to and answer questions.