Setting up a savings goal and savings account can be daunting, but as the year begins, there is no better time than now to do it. Many people think savings of any kind are out of their reach, and as it is often surveyed, many Americans can’t cover a 400-dollar emergency. I get that I have worked a lot of places and have lived paycheck to paycheck most of my life, but I have always prioritized saving something.
When I worked as a banker, I would focus on the basics of income v expenses. If you do not know what you are making versus what you are spending, you can not find what you can save. When looking at your budget, if you can find a surplus then you can use that to fund a savings account if not you have to analyze your spending to find cuts or find a way to boost your earnings. I’m not one of those people that says you can cut out avocados to make a budget but cutting discretionary spending is always a good idea, especially if you can not increase your income.
Once you get a surplus, the next step is to use it. Opening a savings account is easy, and many banks have low deposit requirements and will even set up automatic transfers into your account. These are great for early savers and help you build a nest egg without too much effort. Some people can do this on their own, but I find it better to put a realistic goal of 5%-10% of monthly income and have the bank transfer that for you. The median income is about 37,522 dollars, which breaks down to 36 dollars at 5% or 72 dollars at 10% a week, which is doable for most people.
I know this doesn’t sound like much, but it adds up. Using the median income, that ends up at 1876.10 at 5% of earnings or 3752.20 at 10% of your income. Saving 5%-10% is crucial not just for your financial security but also for your peace of mind. I plan to do a follow-up on budgeting strategies, rate shopping, and your different saving options, but I know you can do this!