How much should you save? Most financial planners will recommend that you save at least six months worth of your monthly budget, so the amount will vary from family to family. This cushion is there to take care of those pesky ‘unplanned’ repairs like a new hot water heater, new tires, not to mention if something happens to your income like a job loss. I am a huge fan of Dave Ramsey’s no nonsense approach to crushing debt and taking baby steps to your financial freedom. Dave recommends that you start with $1,000 to get started until you have your debt under control.
When our fourth child was born, I became a stay at home parent and our income was cut in half. The alternative was to take my income and spend it on daycare! So, I started to understand the meaning between WANT versus NEED. I want to buy that new cute top online, or go out to lunch, or what about a movie date? I used to call them our $100 date nights. Between dinner, movie, and a baby sitter, we could spend $100! (GULP) So we figured out alternatives. Here are a few to help add to your savings account. Participating in this season's event! Not only will recycling your children’s clothing help take a bite out of your budget, but you may make money too! If you participate in a children’s consignment sale, see what other items they will accept and start recycling those household items you have not used in years, or ever! Any extra money needs to go to your SAVINGS.
I need a cellphone, it seems like a want, but I have cancelled our home phone, so kinda need a cell phone. I wanted cable, but found an alternative for that too!
Now the big key is WHAT you do with all that money that you are saving. If you know you normally spend $120 per month on a cable bill and reduce your cost to $7.99, the question becomes what do you do with the $112? If you had the money to begin with when you had cable, your SAVINGS needs to go to your SAVINGS account! In just 12 short months, by only cutting one bill you have over $1,300 extra in your savings account!
Another way to help you contribute to your savings is to use a budget. Dave Ramsey has just launched an incredible tool that I love, EVERY DOLLAR. It is an APP that can track your monthly spending and make sure for every dollar in, it is allocated to do something! Whether it is grocery, gas, home expenses, etc., all of your expense are accounted for each month. If you try this budget for one month, and are faithful, you will find extra money! Pay yourself! Pay now, so you are not in debt later.
As a part of this budget system, I use cash. If I have allocated $200 for groceries, I pull out $200 and budget my spending. You will be amazed at how creative you can be with using only the cash on hand. You guessed it, if you have money left over from your budget, it needs to go to your SAVINGS account. I am not a coupon clipper, but my grocery bill is definitely the next bill on my chopping block, plus I need to be a better meal planner.
Finally, with gas prices at an all time low, what do you do with the savings at the pump? I know how much I used to pay, and the savings that I am loving right now go straight to my account while I am at the pump. Mobile banking makes adding to your savings easy.
If you think about all the ways that I have listed to help you start adding to your savings account, you have really not altered your spending habits, instead you have allocated your savings to yourself! All those little extras we love add up each and every month. Take a month and let them add up in your savings account. You will be amazed, less stressed and have something to show for it. So the question should not be How Much Should You Save, but How Much Can I Save!