Save Every Month
Once you get a good handle on budgeting and spending it’s time to think about investing your funds for better returns on your money. One of your budget items should be a monthly savings amount. I like to think of savings as a way to pay myself. Of course you’ve got to have money above and beyond your expenses to create savings. Once you do there are various ways you can save every month.
As you begin to make a life for yourself one of your first financial objectives should be to establish an emergency savings account. The amount set aside will vary according to your situation but should be somewhere between $2,000 to $5,000. If you have a family, and debt obligations, this number may need to be even greater. This money should sit in a low risk, interest bearing account. Examples are a savings account or a money market fund. By definition these monies are very
accessible (i.e. “liquid”) with little or no cost and earn a nominal amount of interest. The purpose here is to have funds readily available if an unexpected expense arises (which they always do). As you begin investing for long term growth you’ll want to do your best not to touch those investments and allow them the time to create wealth for you. Having an emergency savings account helps mitigate the need for short term money thus leaving your long term investments intact.
- Save as much as you can monthly to reach your emergency savings goal
- Keep these monies in a low-risk interest bearing account (e.g. money market fund or savings account)
- If you draw this account down for an expense be sure to build it back up as quickly as you can