Getting a Real Savings Started (Day 5: Where to Save)
Now that you have committed to how much to save, it’s time to look at options for where to save. This information does not constitute financial advice, but general information that you may benefit from. With that said, there are a lot of people offering recommendations- many very sincerely (like me). I encourage you to make decisions that suit your goals and philosophies about money (as you become educated on the matter). What ALL financial services people agree on is that you must save. Without controversy, pay yourself first.
Start with a starter emergency fund; an account to cover major things that come up. Instead of borrowing someone else’s money with interest (sometimes at ridiculous rates), borrow from yourself. It works like this. Put, your committed amount into a separate savings account. When emergencies come up, borrow from yourself, and build your account back up as quickly as you can. Most banks will allow you to create a sub-account of your existing account. Don’t do that. One of the tactics to help you on your savings journey is to make it easy to get money in and make it difficult to get money out. So don’t link it to your existing account. Consider a bank that will allow direct deposits or auto-transfers in but take a couple days to get it out. Or consider a bank that you have to actually get in a car and drive to. This will allow you to ride out impulse buys- at least until you develop the discipline to reserve your emergency fund for true emergencies (hot water heater goes up, car breaks down, the steps in front of your house collapse). I agree that $1000.00 is a good starter amount. I don’t know who said it first, but I learned it from Dave Ramsey.
Getting your starter emergency fund in place is a high priority. No matter what, life is still going to happen- emergencies are going to come up. Without, you will find yourself in the familiar situation of using someone else’s money. I remember the day, I
vowed that as a grown woman, I would not go back to my parents or my pastor to borrow money. I did it for 37 years. Something always seemed to come up and I found myself with that sickening feeling that I would have to ask to borrow money again- sometimes before I even paid back what I borrowed the last time. So, this is not a small deal, y’all. You need a starter emergency fund. And as soon as you are in position to, bulk it up to at least 3-6 months. It may take a couple years, and that’s okay. You will still have a lot more than most Americans, with just $1000.
Next, contribute towards any matching contribution retirement plans. If your employer will give you $1 or 50¢ for every $1 you put in, take full advantage. Match the entire amount. For example, if your employer will match $1 to $1 up to 3% and then 50¢ to $1 up to 2% more, contribute a full 5%. That will mean, for every $5 you put towards your retirement savings, your employer will give $4. Woo hoo! This is not a pension y’all. This is in addition to any pension you may earn with that employer. Don’t leave any money on the table. Take it all!
When to do this is up to you. Some may urge you to wait, concentrate on one thing, like getting out of debt, and then circle back around to this. Why, because they know the advantage of focus. The more you divide your attention the less efficient you will be at any area. I wasn’t willing to stop or “pause” my matching money. I estimate was that it would take at least 5 years of grinding to pay off my student loan debt and I would have lost tens of thousands of dollars in deposits with interest returns (interest paid to me instead of charged to me).
Do, what is good for you. Once you get your emergency fund is built up-which you can hopefully do quickly, with some creativity and motivation. If you aren’t the creative type, reach out to someone you know who is or browse the internet. One year, I had five yard sales. Then, decide how you can go about bulking up our 3–6-month emergency fund and take advantage of your employer’s matching program. Later down the line, you’ll get into long-term investing outside of your employer’s contribution plan.
Keep going. You can do this!
