You probably drained your accounts and any emergency funds during the financial crisis. Now that things are getting back to normal, start rebuilding your emergency fund, paying down debts, and putting other money into savings.
With the cutbacks in spending you’ve made, you may no longer need every penny just to pay the bills. Use this money to increase the amount you save every month.
Increase Savings
The secret to increasing your savings — whether it’s earmarked for your emergency fund or another savings account — is to “pay yourself first.” Put the money into a designated safe savings account before you pay anything else. Rather than trying to save the money that remains at the end of the month, put it away first—before it gets eaten up by other expenses or you’re tempted to spend it.
Right now, it doesn’t matter how much you are able to save every month. The important thing is making the commitment so that monthly savings becomes a habit. This single act will help you toward a healthier financial future.
Regularly save as much as you can, and strive for at least 10 percent of your income. Write it down as part of your new normal financial goals along with what you learned from this crisis to help you change your financial behavior. Encourage other members of your family to participate in new financial behaviors. This will go a long way in building an emergency fund, paying off credit card debt, and establishing a solid financial foundation.
Tips for paying yourself first:
- Include “savings” as part of your spending plan. Make it a priority above spending for anything else.
- If possible, have your employer automatically deduct money from your paycheck and deposit it into a savings account. If you don’t see it, you won’t miss it. Even if the amount is small (say $10, $15, or $20 a week), you’ll be amazed at how fast your money grows in your savings account.
- Have your financial institution automatically deduct a set amount from your checking account each month and deposit it into your savings account. You usually can set the date of the automatic transfer for the day (or a few days after) your paycheck is deposited into your primary account.
- When paying off one bill, use all or part of the money into additional savings or combination of additional debt payment and savings.
- Put any tax refund, raise, or bonus you receive into savings rather than spending it.
- When you look for a better job, give preference to employers who offer good benefits, such as health insurance, life insurance, retirement savings plans, and transportation savings accounts. The less you have to pay for these, the more money you have to save for your rainy-day fund.
Emergency Fund
For your emergency fund, open a separate bank or savings account if you don’t already have one. If you find an account that earns interest, that’s even better.
As with your other savings, deposit money into the account every month before you pay other bills. Make this savings part of your spending plan and set aside the money right off the top so you aren’t tempted to spend it on something else.
If you have a true emergency in the future, such as a car repair or medical bill, tap into your fund. Otherwise, let the money grow and continue to contribute to the fund each month. Studies show that having even $500 in a savings account makes a major difference in financial well-being.
The Emergency Fund Worksheet will help you know what you need to save to meet your expenses. Your ultimate goal is to have six months (or more) of living expenses set aside. This sounds like a lot, but you’ll get there by making regular contributions.
There’s real psychological power in knowing you have the funds to rely on if you encounter unexpected expenses or a job loss in the future. Think of how you would manage the crisis if you had the emergency fund available for these circumstances.
You probably drained your accounts and any emergency funds during the financial crisis. Now that things are getting back to normal, start rebuilding your emergency fund, paying down debts, and putting other money into savings.
With the cutbacks in spending you’ve made, you may no longer need every penny just to pay the bills. Use this money to increase the amount you save every month.
Increase Savings
The secret to increasing your savings — whether it’s earmarked for your emergency fund or another savings account — is to “pay yourself first.” Put the money into a designated safe savings account before you pay anything else. Rather than trying to save the money that remains at the end of the month, put it away first—before it gets eaten up by other expenses or you’re tempted to spend it.
Right now, it doesn’t matter how much you are able to save every month. The important thing is making the commitment so that monthly savings becomes a habit. This single act will help you toward a healthier financial future.
Regularly save as much as you can, and strive for at least 10 percent of your income. Write it down as part of your new normal financial goals along with what you learned from this crisis to help you change your financial behavior. Encourage other members of your family to participate in new financial behaviors. This will go a long way in building an emergency fund, paying off credit card debt, and establishing a solid financial foundation.
Tips for paying yourself first:
- Include “savings” as part of your spending plan. Make it a priority above spending for anything else.
- If possible, have your employer automatically deduct money from your paycheck and deposit it into a savings account. If you don’t see it, you won’t miss it. Even if the amount is small (say $10, $15, or $20 a week), you’ll be amazed at how fast your money grows in your savings account.
- Have your financial institution automatically deduct a set amount from your checking account each month and deposit it into your savings account. You usually can set the date of the automatic transfer for the day (or a few days after) your paycheck is deposited into your primary account.
- When paying off one bill, use all or part of the money into additional savings or combination of additional debt payment and savings.
- Put any tax refund, raise, or bonus you receive into savings rather than spending it.
- When you look for a better job, give preference to employers who offer good benefits, such as health insurance, life insurance, retirement savings plans, and transportation savings accounts. The less you have to pay for these, the more money you have to save for your rainy-day fund.
Emergency Fund
For your emergency fund, open a separate bank or savings account if you don’t already have one. If you find an account that earns interest, that’s even better.
As with your other savings, deposit money into the account every month before you pay other bills. Make this savings part of your spending plan and set aside the money right off the top so you aren’t tempted to spend it on something else.
If you have a true emergency in the future, such as a car repair or medical bill, tap into your fund. Otherwise, let the money grow and continue to contribute to the fund each month. Studies show that having even $500 in a savings account makes a major difference in financial well-being.
The Emergency Fund Worksheet will help you know what you need to save to meet your expenses. Your ultimate goal is to have six months (or more) of living expenses set aside. This sounds like a lot, but you’ll get there by making regular contributions.
There’s real psychological power in knowing you have the funds to rely on if you encounter unexpected expenses or a job loss in the future. Think of how you would manage the crisis if you had the emergency fund available for these circumstances.