Start Saving! Don’t Wait for the Truck to Hit You

I will start this article with bit a disappointing statistic: FED announced that 46% of adult Americans can’t afford extra 400$ to cover emergency situations. This means that they can’t afford starting a new small business either. And who knows how many aspiring entrepreneurs are bogged down with the lack of funds for their new business?

Low wages, spending/saving ratio caused this scary statistic result. Unexpected expenditures will happen, no matter where you live and how you live. Medical bills, house repairs or car repairs that are not expected pressure most Americans to run into bank and ask for a loan.

Saving should be number one priority for each one of us, even if you think that you can’t afford it. Savings are realistic for almost any budget and they will help even those who are already running their own business. The tips provided below will help with this.

Most of today employees will not have privileges as previous generations had in pension and retirement funds. Social security is still solvent but not to be relied in near future.

How much money should I save?

Answer on that question have been changing each decade. Our fathers were saving about 5% of their income, nowadays that calculation is insufficient. In 90s there was general assumption that 10% of income is enough to be saved, that raised to 15% in new millennium, and now I can freely say that best is to be saved is 20-25% of your income.

The reality of the world we are living is telling us that we must save no matter how that looks crazy to some people.

Best way to start saving is to set yourself goals which you want to achieve, first year goal, second year goal, third year goal, fifth year goal and 10 year goal. Those goals should be reviewed frequently. Important thing is not to be disappointed whatever you have achieved by moment you are reweaving it. You must know that real results come after ten years of saving because of multiplication effect.

For example if you are currently saving 10% of your income for your retirement plan you should try to make it 15% for one year, that you should not even notice on your paycheck, but will add extra funds needed for your retirement.

Almost everyone knows that If your retirement account is not properly funded you are forced to work longer and even have financial issues in old age.

For cash saving you need another tactic. I recommend going to bank and setup automatic withdrawals 5% of your paycheck from your checking account to your long term savings account. That way you will not be tempted to spend your extra cash on some stuff which you will place to storage and never be used.

Most of us paying off debt not looking as saving, but there are lot of benefits of life without debt and not paying high interest rates. First of all you should focus yourself credit card debt and personal loan debt and other consumer debts because they are biggest money extractors. With more money rescued from interest rates you will be able to save and invest in future.

Do you remember that disappointing statistic from beginning of an article that 46% of Americans can’t afford 400$ emergency. So you should think about your emergency fund. to back you up in that case and to avoid taking new loan.

Statistic says that 5 month expenses should be enough to cover most of emergency costs.  So what is keeping you for saving  that money. For example if you save on long term saving account 100$ each month for emergency fund for five years you will have around 7000$ for emergency which will cover almost all emergency expenses.

Whatever your plans are you should start saving as soon as possible. Nobody want to be in that basket with those 46%; I can rely on that.

Daniel Quinn is a freelance writer and a blogger over at http://investmenttraining.org/