Start at the beginning…
To be able to manage your money, you have to have some. This is why you save. Growing up I lived in a home where my parents both had good jobs but money always a source of stress. My parents did not save. They vaguely planned on their respective pensions to support them in retirement, whenever that was going to be. My Dad made more money than my mother but never seemed to have any. Mom, the better money manager, squirreled away what little extra money she had in a secret account she kept from my father, but that was always being depleted by the ‘wants’ of four kids. My parents constantly bickered over money. I believe that is why I became a compulsive saver. As allowances were sporadic, I relied on sneaking into my Dad’s closet and emptying his pockets of spare change. My parents were shocked when they found I had accumulated hundreds of dollars this way by the time I reached my teens. I learned that pennies do add up. When I began working, babysitting and a part-time job at a local business, I made a point of saving 80% of what I earned. When the opportunity came up for an overseas scholarship, I was able to take advantage of it because their objection, “We can’t afford to send you” was moot. At 17, I had the money to support myself for a year.
Saving is a habit. It should begin when you are young but it can be learned at any age. If you are old enough, set up a separate account for your savings to rest in so it requires extra effort to get to it. Be aware, I make a distinction between savings and investments. The latter is how you make your money grow (which I will discuss in detail as this blog evolves), Savings is simply money you keep aside so you do not have to disturb your investments in case of an emergency. Mentally, you need to think of your savings account as a ‘no go’ zone. It is for emergencies only. There is a lot of literature as to how much you should have in this account but I think 3 to 6 months of living expenses should cover you.
Make getting your savings account fully funded a priority. If you live paycheck to paycheck try and give up all discretionary purchases and fund this account. Limit eating out, entertainment, clothing purchases etc. to get this account going. Once you have 3 months saved, reward yourself but keep going. Remember too, as your living expenses rise, remember to top up your savings accordingly. Having a savings account will be a major stress reducer in life.
Tip: Consider using an on-line bank for your savings account. In general they pay a higher interest rates. While interest rates are laughable at this point in time (I earned 8% on mine when I was a kid), they will eventually rise. When they do, interest will help your savings grow.
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