Let’s start by saying that the standards in this economy have shifted. Unemployment is high. The people losing jobs are often going two years without a new job or taking jobs that pay much less than it takes to live the lives many of them have known….forever.
It is no longer good enough to have 3 to 6 months of expenses in emergency savings. In fact, some financial advisors recommend you have 9 months savings. We don’t believe this is enough in today’s economy. We believe the new standard should be 15 to 18 months of expenses in emergency savings (money market savings and certificates of deposit). If you don’t have this already, the question is: How do you build this kind of savings?
Start with your checkbook. Review all spending for the last six (6) months.
Most people will tell you to look at your spending outside of bills, but let’s have some fun by looking at bills first.
Credit Cards – These are the enemies of wealth. If you don’t look at these companies as your enemy, you are making a mistake. They are the biggest problem most middle class families have today. Separate these cards into categories: highest interest rates first. Rank them by highest interest rate to lowest interest rate. Call each credit card company and ask them to eliminate your interest until the balance is paid off. They will not do this unless you tell them you are in trouble and do not want to go bankrupt. You will have to talk to supervisors again and again. Any concession is a win for you. The real plan for your credit cards is to begin by making the MINIMUM payment on each card EXCEPT the highest interest rate card. On that card, pay AS MUCH AS YOU CAN until that card is paid off. Then, rotate to the next highest credit card. Keep doing this as you pay off each card until you have paid off all your credit cards.
Don’t cancel your credit cards. Put them in your home safe.
Other Regular Bills – Begin by looking at these individually. Be honest with yourself about how important each of these “expenses” is in your life. Yes, you can call each of these companies and ask them to help you reduce your monthly bills. You must be open to their suggestions. This could include bundling services or reducing services, but any concession means more for immediate savings to get you on course for putting more money into your savings and creating a true emergency savings fund to protect your family in this economy.
“Spending” Spending – These are the ones people tell you to cut, cut, cut. If you look at the last six (6) months of spending and separate out things that you could live without that are not credit, you are likely to find some “room” in your spending to begin saving money regularly. By being honest with yourself about what you spend that would be better off saved, you can create a true starting point for savings. Again, you have to be honest about the true value this “spending” has in your quality of life.
When most personal finance people will tell you to pay yourself first, this is often the most difficult thing to do. We recommend starting easy. Use our “1% Savings Plan.” Start by looking at your very next paycheck.
Multiply the after tax amount by .01. Take this amount and put it in savings BEFORE you do anything with this money. You can probably save .01 percent of your pay without causing a great hardship on your family. Each paycheck after that (or once a month if you need to do it slower) double the amount you save by adding .01 each time. This way you begin building savings without doing it all at once.
You can build your emergency savings until you reach 20%.
You can build savings step by step until you have your emergency savings fund. When it comes to this economy, don’t expect the government and special interests to help you. Take action and you can grow your savings and then your wealth.
Just take one step at a time. Don’t allow others to tell you that you cannot do it. Share your strategy with your family and work together. You can find ways to make it work and have success.
HELPING YOUR KIDS GET AHEAD
In this country we don’t do enough to teach our children about money, managing money, saving regularly (and automatically), compound interest and steady investing for a long-term future. As a parent, we are always concerned that they get a good education and go to a good college so they can make a lot of money or have a valued career path. The truth is that we could do our children the biggest favor and one of the best things by sharing with them sound saving and investing principles.
You can join our free Facebook group (or have your children do it, too) by searching in the Facebook bar on your “wall” for “Live The Lifestyle Your Family Deserves.” Click on “become a fan.” It’s free and it ties our free blogs into that group.
If you want to give your children the same information we are giving ours, you can purchase the only thing we sell on any of our blogs or groups. It’s called “How To Survive Any Financial Crisis” and you can get it for only $4.95 at http://www.middleclassmoney.com.
Thank you for reading our blog and good luck!
Get more savings by joining our FREE Facebook group “Coupons & Coupon Codes” now only on Facebook. Then, put what you save into REAL SAVINGS to continue to build your savings like we have shown you here.