If you’re one of those people who plans on saving money but never actually gets there—it’s time to reconsider your financial plan. Saving money is possible, but you have to be committed and prepared to make small sacrifices for the greater good of your bank account.
Believe it or not, if you’ve been unable to accumulate any type of financial cushion, there’s a very good chance that you’re doing it wrong. Yes, life happens and major things go wrong; this can mean huge medical bills, the loss of a job, car trouble, or even a leaky roof. All of these things can cost you thousands of dollars to take care of and can wipe out any money that you had saved in a matter of minutes.
Starting all over again after a catastrophe like that can be daunting, but it’s definitely possible. You just need to evaluate your spending habits, plan your budget, and treat your savings account like Fort Knox. This means feeding it at every opportunity and staying out of it unless you absolutely have no other options.
Dipping into Savings Unnecessarily
You should always try to keep at least 3 months’ worth of your regular pay in a savings account to protect yourself against job loss or suddenly being unable to work. This is the usual recovery time for most surgeries and gives you ample time to find another job should something happen. If this fund gets depleted, replace it as quickly as possible.
If you get caught without the backup of a well-padded savings account, finding hard money lenders online is a viable and easy option to keep you afloat for a time. They typically offer loans based on collateral and are very flexible and understanding. That being said, hard money lenders should only be considered as a last resort.
It’s a good idea to hold a few different savings accounts for different things. Keep money in an emergency fund for unexpected expenses, and in a separate one for planned spendings like Christmas. Understanding what you’re actually saving money for can make it easier putting money into an account.
It can be really easy to justify dipping into these accounts for wants instead of needs—especially Christmas accounts. People tend to consider these spendable because they aren’t completely necessary, that is until December rolls around and you start to panic.
Some people just have a huge problem seeing that number growing every month, resisting the urge to go on a spending spree. You see something that you desperately want, like a designer purse or a new piece of tech, and you think to yourself, “Why not? I have the money!”
No, you don’t.
It’s not irresponsible to want things and to justify spending the money, but if you plan on keeping your savings account, you need to change your mindset. Consider that money already spent. You wouldn’t feel right taking someone who’s engaged on a date (we hope), so you should look at your savings account in the same way. It’s off limits unless it’s being spent on what it was intended for.
Treating Your Savings Account Like Your Checking Account
Maybe your checking account is running a little low after a shopping spree, and you have a few bills left to pay for the month. No problem! You’ll just pay them out of your savings—said no one with a successful savings account ever.
This “one-time” solution can fuel a cycle of irresponsible spending that can quickly deplete your funds everywhere. Your savings account is for savings, period. That number should consistently be going up, and your monthly bills should still be getting paid.
In fact, it’s a good idea to treat your monthly (or weekly) savings contribution like a necessary bill. Placing it at this priority level helps you to stay on top of growing that balance consistently.
Your savings account is not something that you should be accessing every month; it needs to be kept separate from your budget, and only used when it’s absolutely necessary, or for its intended purpose.
Ask your bank if they have any type of “Christmas club” a “term savings account” that’s used in the UK. These can automatically deduct a set amount from your checking account each month and place it into a savings account that you can’t access without giving the bank notice and paying a large penalty. While this isn’t ideal for emergency funds, it’s great if you’re saving up for a specific reason.
Being Too Generous
Everyone likes to help out friends and family. Maybe you have a favorite charity, or you enjoy contributing to your church. All of this is great and extremely generous, but there is such a thing as being too generous.
We’re not saying that it’s a bad thing to financially help others out; in fact, it’s quite the opposite. But, if your buddy asks to borrow three-grand for courtside seats to the hottest game of the season, or your uncle needs bail money that you know you won’t ever see again—it’s okay to say no.
Most of us have had to borrow money from friends or family at some point, and it’s nice to return the favor, but giving people large (or even smaller) sums of money for unnecessary expenses is a good way to deplete your savings with little or no return.
If you absolutely need to lend money to anyone, always make sure to draw up some sort of binding and legal repayment contract. You don’t have to include interest or anything like that but having a written contract can protect both of you and save relationships.
There’s nothing quite as awkward as having a family get together and trying to approach your mother-in-law about the money she borrowed and still hasn’t paid back. Having a contract establishes an understanding and gives you legal recourse.
Generally, the rules are simple: don’t touch your savings account unless you have to, don’t spend irresponsibly, avoid impulse buys, and live within your means. If you can do all of this, you’ll see the results in your account faster than you think!