Donell Edwards, Blogger
About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur.
Know Your Money
Wednesday – April 23, 2014
Knowing Your Personal Finances: Are You Ready To Save?
By Donell Edwards
For weeks now we have discussed knowing your personal finances by making a thorough evaluation of debts and expenses to determine just what condition your finances are in. We have also strongly recommended that you use some method to monitor spending on a regular basis each day and identify any wasteful spending habits and eliminate them. We have discussed the importance of acknowledging the need for help if your assessment indicates your finances are out of control, and it is apparent that you lack the knowledge or the will to correct matters by yourself.
We have also emphasized the need to have the willingness to make behavioral changes in one’s thinking, methods, and approach to money management. It has been less than two months since this blog was launched, and in that short span of time many are no doubt still working on all of the things mentioned above.
But as we have previously mentioned, everyone is at a different level financially, and will fall into one of three categories: (1.) Those in dire need for help and who are living from paycheck-to-paycheck. (2.) Those who are managing and have a little money left after paying bills each month but who could do better. (3.) And those who are in great shape and just need to continue to monitor things and build on their success.
So, are you ready to save? Your current level will determine if you are ready to move on now to saving, or if you still have work to do to bring your spending under control, stay within your budget, and continue to work to eliminate your debt. What we suggest is that as you pay off a debt, take the money you were using to pay that debt and apply it to another debt, and continue this process until all of your debt is eliminated. The trick is not to incur any additional debt while you are doing this.
That is where saving and having an emergency fund becomes so important. There will be unexpected things that happen in your life that require money. If you are not prepared those things may take money away from bills that you are paying, or may require you to have to take on additional debt. This is a vicious cycle that seems to repeat itself and keep many people from making any progress. That is where better planning and exercising self-control is important. But having an emergency fund helps eliminate this problem or at least reduce the impact.
If you are at a level where you have already begun saving, we applaud you and your efforts. We encourage you to continue to do so.
Most experts recommend having at least 3 to 6 months living expenses in your emergency fund. This should be a separate savings account from any other savings that you have. Although some reading this may be in a financial position where you think this is impossible for you to do, it is an achievable goal.
I was listening to the radio a few months ago and heard about a fantastic way for people who have very little money to set aside to save can save $1,378 in a year. Then, this process may be repeated over and over again, or modified to increase the amounts and save more. The idea is to get in the habit of saving. To convince yourself that you can save.
I did some research after hearing about this saving method and discovered an outstanding blogger, Lisa Bedford, and her blog, The Survival Mom – http://thesurvivalmom.com/. Monica shared information on her blog about an interesting saving method known as the 52 Week Challenge.
The way it works is that you start with $1 on week one. Then you add a dollar and save $2 on week two, and continue adding a dollar each week until you reach week 52 and save $52, which is the most you will save in any week. This makes saving affordable, and allows you to progressively increase your savings with reasonable amounts that even those who are struggling can afford. You can and will find a way to eliminate spending on some things in order to find the few dollars required to use this plan, and at the end of the year you will have $1,378.
Although this is far less than 3 to 6 months of living expenses for most, it is a start and that is what this is all about, developing the habit of saving. Developing the belief in yourself that you can save. Making saving a part of your life just like breathing.
I recommend setting a goal to save at least $1,000, or in this case, $1,378. Then set a goal to reach $2,000 next, and continue adding a thousand at a time, unless you can do more, until you have saved 3 to 6 months of living expenses. This has to be money that you will not touch unless there is a major life issue that can only be taken care of by using some of the money in your emergency fund.
In a perfect world this money would be totally off limits for any use until the goal is reached, and that should be your goal. But we do not live in a perfect world and things will occur and you may have to use some of the money. The key is to be committed to avoiding the use of the money in the emergency fund you are building unless it is absolutely necessary, and then working to replace what was removed in addition to what you are currently saving as quickly as possible.
There are three very good articles about saving in our “Must Read” section at the end of this post. We strongly recommend that you read those for more detailed information about saving and building an emergency fund.
Also, if you have not reviewed the Thirty Steps to Financial Wellness program at the Money Management International website and have included this in your routine to improve your personal money management, make sure that you do. There is no better time than now, since this is Financial Literacy Month. Have a wonderful day.
If you have questions or need help we are just an email away. Send your questions to Info@KnowYourMoneyGlobal.com
We Would Like To Hear From You. Are There Any Brave Souls Out There Willing To Share? If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to firstname.lastname@example.org.
Must Reads For Savers:
Establish an Emergency Savings Account
Weekly Savings Plan: How to Save Money Even If You’re Broke
10 Ways to Save Money When You Make the Minimum Wage
Follow us on Twitter for more information about personal money management https://twitter.com/Kn0wY0urM0ney
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