The first finance tip is simple - have a savings account. If you don’t have a savings account already then go to your bank and open one. This tip seems so trivial but you would be surprise at how many people out there that does not have a savings account. A savings account is the first of many financial steps to greater financial security. However, before you open your account make sure there is no monthly fee associated with the account and shop around for the best interest rate.
I know a few that have went through financial hardship. One person told me that he waits until payday to afford lunch or dinner. Another person told me the had to sell a valuable collectible item that they cherish just to make ends meet.
Would a savings account prevent any of this? Possibly, possibly not. It just depends on how you use your savings account. The rule of thumb from most financial advisers is to have 6-12 months of income saved up for a rainy day. I would extend that to 12-18 months as you can see how this recession is lasting longer than most have predicted. How in the world would someone be able to come up with 12-18 months of income to put aside in a savings account? Well, in the real world the simple answer is no one.
However, there is a simple way to get your savings account growing automatically. It’s called direct deposit. You can start direct deposit with a simple form from your Human Resource (HR) department. With direct deposit you can have your paycheck divided up and directly deposited into multiple accounts every time you get a paycheck. If you could afford it, I would recommend depositing 90% of your paycheck into your checking account and 10% into your savings account. This automatic splitting your paycheck will also help you budget. Since the money is already taken out before your paycheck gets deposited into your checking account your mind gets trick into thinking that this is all the money you can spend. If you don’t use direct deposit I can bet with you that you will eventually fail to save the amount you intended to.
Today the national personal savings rate is above 4%, meaning that the US poplation in general saved roughly 4% of their disposable income. What is your savings rate?
