Being the queen of your own financial destiny is priceless … and can be as scary as some of Lady Gaga’s heel heights. Whether your salary is as high as a modest kitten heel or soars to stiletto altitudes, you’re only as financially healthy as your savings habits. Maybe you’re eating Ramen to make your money stretch, or worse, living off your credit cards, but that doesn’t mean you can’t start saving now. J.D. Roth, of GetRichSlowly.org, offers these tips to get you saving even if you feel like you’re barely getting by.
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Realize that stashing cash can save your ass
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You won’t be motivated to save until you acknowledge it’s more important than that pair of hot purple sex shoes. Roth stresses the importance of the habits saving will teach you. “When you save, you’re learning to live on less than you earn. If you’ve been saving 10-20% of your income, then you already know how to live on less if you suffer a pay cut.” It’s also important to have some money sitting in the bank to soften any unexpected blows. “We have no idea what life holds in store,” says Roth. “When we set aside money in an emergency fund, we’re insuring ourselves against the bad things in life. It’s an awesome feeling to have enough money in the bank to cover three months of expenses. You know that if you were to lose your job, you’d be okay.”
Identify why you’re saving
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Maybe you want to be a billionaire like Bill Gates, or maybe you still really want the hot purple sex shoes. Whatever your goals, stating them can keep you on track. “If you’re just starting out, the first thing you should save for is your emergency fund. This is your safety net, and it’s vital. You should boost your emergency fund until you have three to six months of living expenses. After that, you can start setting money aside for retirement. And, as you save for retirement, you can save for other goals,” says Roth—goals like a vacation or even shoes. Roth is a fan of targeted savings accounts, where you open an account for each goal.
Ease in
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Setting unrealistic goals will only discourage you. Even Roth started small. “I started out saving just $50 a month, and gradually set aside more as I learned to cut out other things in life. Just get in the habit of setting aside money, and do your best not to touch it. Saving is like any other skill; it’s something that you have to learn, and something that gets easier in time,” he encourages. Even if you can only put $5 a week in your savings account, it’s more than you’d have if you’d spent it on a latte.
Automate your saving
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“The best methods of saving are those that take human psychology out of the equation,” says Roth. Set up money to go to your employer’s 401k or IRA fund before you even see it. “This money comes out of your paycheck before you get it, so you never have a chance to spend it on other stuff.” Roth suggests automating your saving further using an online savings account outside your regular bank. “If you make automatic transfers to an online savings account at a different bank, your money is still there when you need it in an emergency, but it’s tougher to reach to spend on a whim.”
Original by Colleen Meeks
