Photograph Courtesy Of Public Domain Pictures
Having savings available to use in the event of an unexpected financial issue is one of the best ways to ensure future financial stability. Unfortunately, a large portion of the population has no savings available to use when unexpected expenses arise, leaving them to rely on expensive credit that can further destabilize a precarious financial position. To prevent this, it is important to have a savings plan you can follow that allows you to save for your future while still taking care of your current financial obligations. Here is a simple savings plan that anyone can use to increase the balance of their savings account.
Bank 10% Of Income
The most important thing you can do to increase your savings is to bank a portion of your income every time you get paid. Many people believe that they do not make enough to save a significant amount of money because they are trying to save a certain amount instead of focusing on saving a percentage of what they make. Anyone can save 10% of their income without significant changes to their current lifestyle, regardless of how much money they make. If you bring home $500 every two weeks, $50 should go into your savings account. If you make $2,000, sock away $200.
Save Half Of Any Additional Payments
Many people are fortunate to get monetary payments throughout the year that are in addition to their income. These payments can include income tax refunds, employment bonuses, lottery winnings, and gifts. When you receive these types of payments, at least half should be saved for future needs while the other half can be used for immediate needs. When your car breaks down or your washing machine conks out, you will be happy that you had the foresight to save some money.
Leave Your Savings Alone
The most important part of growing a savings account is leaving the money alone unless it is absolutely necessary. Your savings should not be used for frivolous purchases, such as buying a new purse or paying for a night on the town. The money should not be used to pay bills so that you can spend the rest of your income on other things. By restricting the use of your savings to true financial emergencies, you increase the chances that your money will grow to an amount significant enough to improve your future financial security.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.
Leaving your savings alone is so important! Its so easy to convince yourself that it is ok to dip in when you need something here or there, but the truth is, you can’t do that! You’ve got to work hard to save the money and leave it there for when you really need it. It takes discipline to do so.