The Importance of Saving
Financial independence doesn't come easily to most people. American consumers are notoriously reliant upon credit to acquire the trappings of an upwardly mobile lifestyle- a flashier car, a bigger house, every new electronic device that hits the stores. If you find yourself constantly trying to keep up with friends and neighbors as far as owning all the latest "must-haves" you may already be headed for a serious debt problem.
The use of credit isn't always a bad thing. When used properly it allows you to purchase a home (mortgage) or a new vehicle. However, overwhelming credit card debt is a problem which affects millions of Americans. The typical American household which has credit cards now owes an average of $15,500 on those cards. If you only make the minimum payment each month on these outstanding balances it will take years (maybe decades) to fully pay off the money you owe.
If one of your long-term goals is to be debt-free and financially independent, it is imperative that you have a plan to pay down your outstanding debt at a faster-than-normal pace. You may be thinking "I barely scrape by from paycheck to paycheck so how am I supposed to come up with extra money?" It will take a serious commitment to control your finances and change your spending habits, but it can be done.
One of the most important things you can do to improve your overall financial health is to get in the habit of saving. Without an adequate emergency fund to fall back on, you will be at the whim of every unexpected financial situation that occurs (and they always occur). If you have to take on new debt (such as a loan or new credit card purchase) each time you have a monetary emergency, your road to financial freedom is going to be a bumpy one.
If you have never saved before, it may seem like an impossible task. But the important thing is to start. No matter what your current financial situation is, the time to begin saving is now. If you are in debt, it is vital that you get in the habit of saving and also aggressively pay down the money you owe.
Start Small, if Necessary, but StartYou may not have a lot of money to put aside at first and that's ok. The important thing is to start. Here are some suggestions to help you begin:
- Go over your budget. Make cuts everywhere possible. The more you trim your monthly expenses, the more cash you will have to put away.
- Sign up for direct deposit at work. Have a certain amount deducted from each paycheck and deposited into a savings account. Even if it's just $20 to start, do it. As your outstanding debt decreases, increase the amount you save.
- Pay yourself first. This is a great rule to live by. Consider your savings like any other bill you pay.
- Keep the change. At the end of each day, put your extra change into a jar. Every month add up the coins and put the total amount into your savings account. It may not sound like much, but even a dollar a day is $365 a year. It all adds up!
- Stop overspending. Put away the credit cards and live on a "cash only" basis. Research has proven that consumers who pay for purchases with cash are much more cautious about buying things. Employ the "72 hour" rule. Give yourself three days to think about the purchase. Chances are you won't be that excited about it once you wait. If all else fails, stay away from the mall.
- Sell your "treasures" that have accumulated in your garage or attic. Have a yard sale. List items on the internet. Not only will you free up space, you can get extra cash to put into savings.
Almost everyone will face an unexpected financial emergency at one time or another. Whether it's a medical bill, a new water heater, a new set of tires, or a car repair, money put aside in a savings account will let you deal with the unplanned situation without having to take on more debt. This is always a financial plus. Be prepared for the financial unknown ahead by beginning to save today!