Do you have any savings? Most Americans don’t. In fact, 56 percent of Americans say they have no rainy day funds, according to a 2012 survey.
Not saving any money is the number one financial mistake that people make. Without any savings, a single unfortunate incident – your car breaking down, an unforeseen medical expense, an outrageous utility bill – can derail your financial future. And without savings, it’s nearly impossible to reach your financial goals, like being able to retire or buying a house. Savings is essential for healthy finances, and it’s easier to accomplish than you think.
But I Don’t Have Any Money To Save!
The number one thing financial counselors hear when they recommend saving money is that people don’t have any money to save. Many people are living paycheck-to-paycheck and simply don’t see any money available to stick in a savings account, even if they wanted to. But a closer look at your budget can often reveal several areas where you could be spending less, and thus saving more:
Groceries and Eating Out – the average Austin, Texas resident spends about $200 per person per month on groceries, and that doesn’t include eating out. How much are you spending? Spending on food can quickly eat up any extra money you have in your budget and prevent you from saving.
Insurance – Most people just have their car or other types of insurance on auto-pay and don’t notice when their rates go up every year. Shopping around for a new insurance company every few years can save you hundreds – money that could be going in a rainy day fund and earning you money.
Utilities and Services – Take a look at all the services you pay for and evaluate if you’re really using them. Do you really use your cable that much? If not, why are you paying the huge bill? It’s easy to sign up for web services like music streaming or books and then use them less than you thought you would. Reevaluate the services you pay for to see if they’re worth it. That money could be going in a savings account, even if it’s just $10 or $20 a month.
A good financial counselor can help you take a look at your budget and figure out where you could be spending a little less and saving a little more. Texas Legal members get free financial counseling sessions through Cornerstone Financial Education, including one-on-one evaluations for budgeting and saving.
Start Now, Not Later
April happens to be financial literacy month, but it’s also a great month to start a savings account. Why? While many people put “start saving money” on their list of New Year’s Resolutions, they’re also desperately trying to recover from paying from last year’s holidays. Start saving mid-year and you’ll have a better chance of having money to save. And when Christmas comes around again, you can use your savings to pay for it, not your credit cards.
Using your tax refund is also a great way to start saving. Maybe you’re planning on using it to take a vacation or buy something that’s on your wishlist. You can still do that, but why not set a little aside for savings? You’ll thank yourself later, long after the vacation is over or your new toy has lost its appeal.
Set Yourself Up For Success
Automatic savings are one of the best ways to actually build a savings account. Although you might forget (or not really want to) put that $50 in your savings account rather than spend it every month, if you set up an automatic withdrawal from your bank account, you can save without even thinking about it. Contact your bank or credit union to set up a savings account with an automatic withdrawl from your checking. You can coordinate with them based on when you get paid to make sure you have the funds available.
Think About the Big Picture
Sure, it might not sound like much to save $50 a month, but think about the interest you could be earning. But say you put $100 from your tax return into a savings account with 7 percent interest and then set up an automatic withdrawal of $50 every month. In 10 years, you’ll have saved nearly $9,000, according to Bankrate’s Simple Savings Calculator. Now that’s a pretty great rainy day fund!
If you’re a Texas Legal member, remember that you can get free financial help through our partnership with Cornerstone Financial Education. And if you’re not a member yet, consider signing up. With free financial education, identity theft monitoring and protection, plus a long list of covered legal services, you’ll be making a solid investment in your future.