We Know This – Saving Money is Hard.
Financial advisors offer the same piece of advice to those just starting to save money: everyone should save at least three to six month’s living expenses. And it’s good advice. Having funds to hold you over while you face a job loss, major illness or other expensive life event is a wonderful gift you can give yourself. The peace of mind that comes with knowing you can face life’s challenges is well worth the effort.
But effort is an understatement. With the US savings rate currently about 4%, clearly few of us are setting aside 20% – 30% of our monthly income to build up big, fat emergency savings accounts. This level of saving is difficult, if not impossible, for many.
Are PayDay Loans the Answer?
What if you have no savings at all and your current level of money management finds you just making it, paycheck-to-paycheck? Alternate savings advice is commonly “at least $5.00 per paycheck”. While certainly better than nothing, this plan would net you $1,000.00 after 7.5 years of saving, assuming your payday comes every two weeks. With such a slow savings rate, why even bother. Robbing Peter to pay Paul or (yikes) taking out a PayDay loan will get you out of a minor financial bind faster than 5 bucks a payday ever will.
Zero savings, however, leaves you at the mercy of your finances. The only thing we know for sure about financial emergencies is that they will happen, eventually.
SMART Goals Make it Happen.
This saver’s advice? Do the best you can. Pick a goal that works for your situation, set specific amounts and give yourself a strict timeframe to build up your projected savings.
No financial adviser knows exactly what your situation is, but they get this one right, every time: paying yourself first is a must if you want to regain control of your finances.
When you are ready to save, make your goal a SMART one: Decide upon a Specific amount, which makes your goal Measurable. An Attainable goal is one you have the means to reach, while a Realistic takes other time and money obligations into account. A Timebound helps you plan to save a specific amount, reaching your goal by a specific date. Setting these timeframes helps keep you motivated to meet your goals.
