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
Monday – May 12, 2014
Knowing Your Personal Finances
Special Savings Series: Getting Started – Do You Have What It Takes?
By Donell Edwards
Good morning everyone! This week we zero in on saving, following up on our special series last week on managing debt. Hopefully, you are at a point in the process where you have begun to carefully monitor your spending on a regular basis, you are evaluating your spending and eliminating wasteful spending and overcoming bad habits, you have prepared and are rigidly following a realistic budget, and you have gotten your debt under control, or you are in the process of doing so. These are all steps that must be in place and should be accomplished before seriously working to have a successful savings plan. One other important step in the process is implementing an emergency fund, which we have discussed briefly in previous posts.
Our special series this week will discuss saving directly, as well as other aspects related to your success in establishing and maintaining a successful savings plan.
So, are you really ready to start saving? Over the past two months we have talked about the importance of controlling spending, and the fact that in addition to having a realistic budget and doing the proper planning, it takes sacrifice, willpower, determination, and a willingness to change in order to successfully control spending. Obviously, in order to save there must be funds to save. Those funds should come from effectively managing the income that you have, implementing and closely following your budget, and paying down your debt. As you pay down your debt or receive income occasionally from other sources, use that money for your savings.
The first savings project you should have is your emergency fund. One of today’s Must Reads, Before You Start to Pay Off Debt…Do This, discusses the importance of an emergency fund. It is important that you have planned so that once you start saving there will not be anything to interrupt your regular contributions to your savings. That is where your emergency fund comes in. There will be unscheduled expenses like vehicle repairs, appliance repairs, home repairs, paying for insurance co-pays or deductibles, and a variety of other things. An emergency fund allows you to continue to follow your budget and continue to save and care for those expenses.
Most experts recommend having an amount equal to six months living expenses in your emergency fund. It is a good idea to do this in stages. First set a goal to accumulate at least $1,000 in your emergency fund. Do not spend this money for vacations or anything other than real emergencies. Then as your next goal build that amount to 3 months living expenses. Once you achieve that goal, then continue until you have 6 months living expenses. After you reach 6 months living expenses continue to add to the fund until you feel comfortable that you have enough breathing room in case of a severe emergency. And again, do not spend this money for anything other than emergencies.
As mentioned earlier, it will take sacrifice, willpower, and determination to stay with your savings plan. But, if you are not a person who understands the importance of making sacrifices, if you do not already have willpower, and if you are not determined, how do you acquire these qualities. In our other Must Read for today, 9 Ways to Harness Your Willpower to Save Money, writer Marilyn Lewis cites a comment from a book review in Mother Nature News from The Power of Habit by Charles Duhigg showing how habits begin with conscious choices, “Then we stopped making a choice, and the behavior became automatic. It’s a natural consequence of our neurology. And by understanding how it happens, you can rebuild those patterns in whichever way you choose.” So, by repeatedly exercising self-restraint, resisting temptation, and making sacrifice, these choices become habits. These qualities can be learned with time and effort.
So, do you have what it takes to become a saver? If you don’t, now you know how to get it.
Before You Start to Pay Off Debt… Do This
9 Ways to Harness Your Willpower to Save Money
If you have questions or need help we are just an email away. Send your questions to Info@KnowYourMoneyGlobal.com
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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 email@example.com.
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Disclaimer: I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.
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