It’s payday!
You know what that means!
Time to pay some bills … am I right?
But it also means, it is time to put some of that hard earned cash away into your savings accounts.
Having money squirrelled away to use for certain expenses, helps you avoid getting sucked into debt. If you have money put aside you are less likely to use a credit card, or take out a loan.
There are many things we want to spend our money on. But it is important to start putting money aside for the following things.
Emergencies
The first thing that you should save for is an emergency fund.
An emergency fund is not to be touched, except for unexpected emergencies. This money can be accessed right away and is not locked up in the market.
The last pair of shoes in your size, does not qualify as an emergency. Just so you know.
By having an account only used for emergencies, it offers protection both financially and emotionally.
As you know we all had a reality check when the pandemic hit, and many of us got laid off or lost our jobs all together. Those who had an emergency fund had a cushion to fall back on, until they could get back on their feet again.
Now how much should I keep in an Emergency Fund?
To get started on an emergency fund, build up at least $1000 in an account. Then you can work your way up to the recommended 3 -6 months worth of living expenses.
So if you spend $2,500 a month, you would need to save up $7,500 for 3 months worth, and $15,000 for 6 months worth of living expenses.
That way if you get caught off guard with an emergency, you will be able to manage it financially.
Repaying Your Debt
The next thing you should be saving money for is to pay off any debt you have.
Debt accumulates most easily when people live above their means.
The best way to tackle debt, and avoid overspending is by spending money on essentials and limiting the purchase of non essentials.
Debt can be very dangerous, as interest can quickly accumulate, faster than you can manage, leaving you mentally and financially overwhelmed.
Tackling Debt
If possible it is best to pay your credit card balance off in full every month. Also take a look at what you are using your credit card on, can you cut back on some of those costs.
Credit Cards are not the only debt you need to pay off, get rid of those student loans, those car loans and any other large sums of money you owe.
Do your best to save up a chunk of your pay to help lower these debts.
Housing Costs
Whether you are looking to rent your first apartment, or upgrade to your dream home, you will need some sort of down payment (A big check or a wad of cash).
Housing is by far the largest purchase you will ever make (Trust me, I emptied all of my accounts to purchase a condo – Do not recommend).
Even if you plan on renting, a large portion of your pay every month will go to keeping you warm and sheltered from the elements.
Start putting money aside to build up a nice nest egg, that you can use when you are ready to make the move. Depending on your timeline, and budget, choose an amount that you can afford.
For me when I was saving to buy my own place, any money that was not used on my expenses, went into saving for housing.
Retirement
You knew this one was coming right?
I mean we all hope to retire sooner than later, but how do we expect to make that happen if we don’t start saving today.
The best time to start saving for retirement was yesterday, so the next best time is today. The earlier you can get started, the more your retirement savings will grow. Especially if you have them in a retirement savings account, and can have that compound interest work for you.
Questions to Help You Plan for Retirement:
What is your current salary? Can you live comfortably off that?
Do you plan to travel?
Do you hope to eat out regularly?
Do you plan to hit the golf course regularly?
Do you wish to be financially stable?
Don’t forget to account for inflation, which is usually around 2%, but since the pandemic, is climbing up past 3%. Meaning the money you have now, will be worth less in the future.
How many times have you heard your parents, or grandparents, talk about penny candies, going to the movies for a nickel, or even buying their house, for the current price of a car. (#Inflation, #Jealous)
So if something normally costs $100 nowadays, in 30 years time, when you’re hopefully retired the same item could cost you over double at $212 (2.5% inflation rate).
Have I scared you into saving for retirement yet?
Health Care
Even if you live in a country with free healthcare, that does not mean every health related expense is covered.
Even insurance plans do not cover every procedure, test or medication, it does not hurt to have some money set aside for those unfortunate medical expenses that will turn up eventually.
Recurring Major Expenses
Property tax anyone?
Income tax.
Dental check ups.
Vet check ups.
Sometimes we forget these major costs because they do not occur monthly like our other expenses. But by planning ahead you won’t be caught off guard the next time they come round.
If you know the amount that is due, you can divide the amount by the number of months you have left to pay. That will give you the amount you should save each month.
For example my cat Reese is due for his vaccinations in November. The vet bill is usually about $300. It is currently June so that gives me five months to save up for this expense.
Therefore $300➗ 5 (months) = $ 60
Sixty dollars a month will need to be set aside. If I am short on funds, I may need to make a cut here and there.
For example $60 could be a date night, which we can choose to make a meal at home instead and save that money.
Your Financial Goals
What are your reasons to save money?
Planning on buying a dream house?
Heading off to University?
Wanting to start a family?
Saving money gets easier, when you have a worthwhile goal to stick to, and keep you on track.
Whether you are saving up for a car, vacation, college, or another big purchase, it is best to put money aside as soon as you can.
For your goal, pick an amount and a date that you will need the money by, and work out how much money you will need to put away each month or year to get closer to your goal.
Birthdays and Christmas
Did your child come home with another birthday invitation for a kid in their class you’ve never met?
Christmas will be here before we know it, will you be ready?
Birthdays
It is easier to have an account or amount of money put aside dedicated to gifts, to help you stay on budget each month.
Planning ahead for birthdays helps.
Keep a list of possible items, and always keep an eye out for deals. For children, keep a gift stash of toys, art supplies, or books, to save you from running to the store last minute and overspending (On a kid you don’t even know).
Christmas
It may be the most wonderful time of the year, but it is also the most expensive.
To avoid stress, make a list, check it twice, find out who’s… got the best deals, and stock up.
I usually buy throughout the year for Christmas, if i see a great deal on my go-to stocking stuffers, I’ll buy them even if its as early as March. (No one will know how much you spent, unless you left the stickers on).
Spreading the Christmas cheer can add up. By putting even as little as $25 a month into a Christmas account starting in January, you will have $300 by December.
To save money on holidays and birthdays, opt for handmade cards, and try your hand at homemade gifts. It helps save your hard earned cash, and most people will appreciate the heartfelt gifts.
A Fun Fund
Ooooh now we’re talking.
Okay, you see the importance of saving, for all the expected and unexpected costs to live. And you now know all the responsible things you should be saving your money for, time to make room for some freedom.
Having money to allow for those smaller purchases, or a treat here and there, allows you some much needed balance.
This fund should be guilt free, as you are saving in all of the above areas, like the responsible adult you are.
So live a little and spend your fun money how you see fit!
I usually put whatever money I have left into my fun money account. Another way to do this is pick a set amount you are comfortable with and deposit into your account. Such as 20 bucks a week to spend how you see fit.
You made it to the end!
That wasn’t so bad was it.
Now that you have some ideas of what to save for, let me know what you put money aside for each month!
Stay frugal,
Connie xoxo
