Around 25% of people in the US have zero emergency savings. If this is you, there is a huge possibility that you are at a high financial risk. Saving money is something that most people say they want to do but there are reasons why it does not happen. The very common excuses are:
- I cannot save money.
- I do not know how saving should be done.
- There is not enough money available to save.
- I do not have the information needed to save.
The problem is that all of these are excuses. Saving money is always possible. Things are quite simple in fact. This is different than being accepted for large business loans. If you want to go over financial problems, you need to save money. Here are some ways to do just that.
Pay Off Debts
You might think this is not saving but as you remove debts like credit cards and student loans, you quickly realize the fact that you have more money to save than what you initially think. Money that you now use to pay debt can actually be added to a savings account. Focus on paying off debts first, before you do anything else.
Build An Emergency Reserve Fund
Try to build a fund that is as large as around 3 to 6 months when calculating expenses. Obviously, this is very difficult to do for many. Just try to do it as slowly as you can. After you have an emergency fund set up, use monthly contributions to increase your emergency fund. Auto-deposits can be set up right from the paycheck.
Build Long And Short-Term Savings
The emergency savings accounts should be put into high-yield accounts. With long-term savings, it is better to use something else. This includes funds you would eventually use for a larger purchase, like buying a home. Obviously, you need to focus on short-term savings first. Then, you can move up to longer savings plans.
Max Out Your Retirement Plans
When you work somewhere that offers 401k, try to max it. This is basically free money that you should not neglect, especially if your retirement savings are not as high as they should be. Basically, a good rule of thumb is to match how much money the company offers.
After you do this, try to max out extra retirement savings options. You could contribute to IRAs and look into various other retirement plans that are available for you.
Always Take Small Steps When Saving Money
One of the biggest reasons why people fail as they try to save money is that they do it too fast. You can so easily lose motivation if you do not have immediate results. However, in order to gain financial freedom, you absolutely need to work on it. This means you should take it slow. Every single small step you take is a huge gain in the long term.
Unfortunately, it is common to see that people wait until huge financial problems already exist. Although even then it is possible to start saving, it is easier to do so when you do not have problems.