You may have heard that it’s important to have enough money in a backup savings account to last you three to six months in case you can’t work. Having a savings backup is helpful for those emergency fixes or replacements that can hit you unexpectedly.
Save While Your Young
It’s so easy when you are young to think only about the present and not worry about how you will live when you’re older. But if you don’t plan ahead, you may have a lower quality of life when you’re older then you do now. Plus when you get older you can’t always do the same work you’ve done all your life due to what age does to our bodies. It could be very depressing to have a lower quality of life. Many people experience high anxiety levels without a savings backup because of the daily worries about how you are going to pay your bills. Here are some ideas to help you plan ahead.
What if you get hurt or sick and can’t work
Depending on where you work, you may not have a disability insurance plan. If you do have one you will get a regular check for whatever amount of time the insurance covers, and hopefully, you are ready to go back to work when that time is up. That check, however, may not be as much money as you make when you’re working.
There was a time we needed some backup savings and we didn’t have it. My husband was diagnosed with cancer at a time when our financial resources were destroyed. We invested in a business plan we thought was sensible and pretty much a sure thing. Even though we were in business for twenty years, the wisdom and lessons we learned did not prepare us for what the people we were working with did to us.
During this time we had no backup savings account in the event something would happen. We could have done this by selling things we didn’t use, never eating out, and other frugal things. I am always looking for the best deals when I need something and I felt I wasn’t an overspender and we have to admit we didn’t plan for what happened. Who would have thought my husband would get throat cancer at age 50! Nobody expects bad things to happen to them. Regardless, better safe than sorry and we were very sorry.
We could have done more of these savings tips when we were first married in order to have a savings account. But we didn’t. When the unexpected happened ( I explain more in my book ) we had to sell our house before it went to foreclosure. Everything we worked for and earned in twenty years was lost.
Things to Remember
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- Save enough money to cover all your expenses for at least three months, preferably up t0 six months. Add up all your monthly expenses and add extra for inflation.
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- Add the inflation average to the account every year. The inflation average that most investment brokers use is 3%. If you need $4000.00 a month to live this year then next year you may need $4120.00 a month the following year.
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- Find out the details of your disability insurance at work. How soon would it start after you can’t work and how many weeks does it pay for. If there is a waiting period before it starts then that’s how many months of savings you should add to your savings account at the minimum.
Little Ways to Save that Make A Big Difference
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- Fill out a budget for everything you spend, even the coffees at Dunkin Donuts or Starbucks!
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- Take your total income after taxes and insurance if that is deducted from your paycheck. Subtract everything you spend and see how much you have left over.
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- Take a look at where you could cut back in order to put money into savings.
Can you spare $50 a month? Take that times 12 and you have $600.00 in a year towards your goal. You are better off trying to save for your backup savings account faster than that, but if that’s all you can do it is better than nothing! Do what you can. If you need to have $4000.00 a month you could save $334.00 a month for a year to get one month’s savings. It takes a good portion out of your monthly earnings to save for your backup account so it’s best to have a backup before you go into renting or buying a home.
- Take a look at where you could cut back in order to put money into savings.
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- Keep in mind that you need at least three months of savings. If you need $3000.00 a month to pay your living expenses then you would take 3000 times 3months to get $9000.00. That sounds like a lot of money but imagine having to come up with that amount if you can’t work!
Get A Few Apps On Your Phone to Help You Save
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- Consider all the ways you can save on groceries, cleaning products, eating out, shopping at consignment shops, and using apps such as Ebates, Ibotta, and Groupon
. You will make more money available to save quicker! All of these apps work easily on your smartphone and pay you a bonus for your first use. Groupon and Ibotta can also be used together for one item! It only takes a few minutes to sign up and you will easily find a few things that you can save a buck on. So that’s about a buck a minute to sign up. Pretty Cool! Click on the blue links above to start!
- Consider all the ways you can save on groceries, cleaning products, eating out, shopping at consignment shops, and using apps such as Ebates, Ibotta, and Groupon
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- Put your savings in the highest interest paying account that you can find that doesn’t charge a lot of fees. This way you won’t be charged a penalty if you need to use the money. Sometimes, buying CD’s is a good investment and it’s fairly easy to take your money out when you need it. Check with your bank. CIT Bank pays 1.30% on your savings account as of today. This amount will change according to the market.
Don’t Lose What You Worked All Your Life For!
Do not use the money for anything unless you absolutely need it in an emergency. It shouldn’t be used for vacations, parties, vehicles, or boats. The piece of mind you will have by having an emergency backup savings account is worth more than any of these things.
Remember, if you have this savings before you move out on your own, it’s a lot easier to save for the fun stuff. If you are still living at home and working, it might only take you 4 to 6 months to get your backup savings account up to where it needs to be. Believe me, no worries is the way to go.
You never know what the future holds. Hopefully, you will never need that money! When we had to sell our home it was extremely disappointing because we had 32 acres of beautiful wooded land and a large 4 bedroom home with a large deck and other luxuries. We were in our 50’s and had to start over like someone in their 20’s. We only had 17 years left to save for our retirement. You don’t want this to happen to you.
If you already have your emergency fund please share with us the things you did to save money.
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