By SimplySafeDividends.com | September 21, 2016
If you weren’t born into riches, chances are that you’ve had to grow up and get a job to earn the money you need to survive.
Particularly if you’ve formed a family along the way, it’s important to do what you can to protect the money you’re earning, the money you’re saving, and the people who have come to depend on you and your income.
Let’s take a look at some basic financial planning tips that can help you better secure your finances and build a solid foundation for your family’s future.
1. Build an emergency reserve fund
The first and most basic step toward improving your financial situation also happens to be the one that is most frequently overlooked or, worse, dismissed — establish an emergency reserve fund. This doesn’t have to be a monumental or complex account; an ordinary savings account at your local bank will work perfectly.
Your goal should be to accumulate a minimum of 3-6 months’ worth of expenses in this account. You’ll sleep a lot better at night knowing that, no matter what happens, you’ve got enough cash socked away to continue paying the bills and living in the same style to which you and your family have become accustomed.
Think of your emergency reserve fund as the foundation on which the rest of your investment endeavors will be built. You won’t be using that money to begin investing in bigger and better, more complex vehicles, but the fund’s existence is the cornerstone of a solid economic progression.
Plus, the dedication and discipline you will have to demonstrate in order to consistently set aside a portion of every paycheck will serve to condition your mindset for future opportunities and the rest of your financial planning journey.
2. Pay yourself first
Still on the topic of establishing an emergency reserve fund, there is a right way and wrong way to do it, believe it or not. When considering the generic concept of saving money, most people make the mistake of taking the position that, “I’ll save whatever money I have left over when I get my next paycheck.”
The problem with that, and the reason those people never end up with any real savings, is that there’s never any money left when the next paycheck arrives.
There is a reason why consumer spending accounts for 70% of GDP – Americans are prone to spending practically all of their income no matter how much money they make. A recent Bloomberg article reported that close to half of those making between $100,000 and $150,000 per year have less than $1,000 in their savings accounts.
If you’re serious about saving money, whether it be to continue building your emergency reserve fund, growing a retirement nest egg, or planning for a large purchase, the key is to set that money aside as soon as you get paid. Your savings goal should be a top priority — nay, a requirement — that’s no less important or mandatory than your mortgage payment, utility bills, car notes, and health insurance.
Treat it just like you do the rest of your monthly financial obligations and write out a check to pay the “bill” that is your savings goal. Even if the amount you set aside is small, over time those small deposits equal one big one. So, don’t get caught in the trap of trying to justify skipping out on a payment to your emergency reserve fund just because the amount wouldn’t be significant.
