People who are living paycheck to paycheck are basically living in financial survival mode which is a stressful, exhausting, and a dangerous way to live. Fifty-nine percent of adults age 44 or younger do not have even $500 saved, according to the Social Security Administration. It wouldnâ€™t take much of an emergency to derail a familyâ€™s finances if they only have a few hundred dollars saved up â€“ an ER visit, paying the deductable on a car accident, having to repair a home appliance, etc.
Saving is an essential goal to have. Emergencies are a fact of life. Itâ€™s not a question of â€œifâ€ you will ever have an emergency, but â€œwhen.â€ So having money saved is a necessity. Itâ€™s been widely recommended that adults save three to six months of their annual net pay. While this is a good long-term goal to have, it can unintentionally be very discouraging to those who have little or no money saved. A good short-term goal may be to save $500. Set short-term, mid-term, and long-term goals and write it down and post it where it will be a regular reminder to work toward your goals.
The most successful savers will have a budget to keep them focused and goals to motivate them to stay on-budget. Tracking expenses for a month to see where your money is actually going is an important first step to creating a realistic budget. Oftentimes someone will find a blind spot in their spending, such as spending too much on entertainment or dining out, and tracking expenses will discover this and allow the person to make necessary adjustments to a budget. With expenses tracked and a budget in place, it will be much easier to build an emergency savings cushion.
Itâ€™s typically easier to reduce or cut expenses than it is to earn more money. So review your spending. Look for ways to cut back or things to cut out entirely, at least until you reach your minimum savings cushion.
Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. To schedule an appointment with a Certified Consumer Credit Counselor contact CCOA at 800.889.4916, or visit CCOA online at www.CCOAcares.com.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.