Being financially responsible is a big deal and surprisingly, many people struggle in this area of their lives. One very basic thing that everyone needs to consider when planning out finances is money set aside for rainy days. Most advisors will tell you to have at least what you earn in 6 months to a year in your emergency savings plan. Why? Because it is inevitable that emergencies and other unexpected expenses will surprise us from time to time.
Purchasing an insurance plan that has a money back policy can ensure that you have money to cover emergencies. These types of policies offer you money back with regular pay-outs, as well as offering you protection from unforeseen events. This can allow you to save more money in different places or for different reasons. If you find that it is difficult to save up 10 to 20% of your income, this type of insurance policy might be a good place to start.
Know Your Budget
One of the simplest things you can do to better manage your money is to make a budget. A budget is a record of income and expenses. If you don’t know how much money you spend each month, start keeping a record of your purchases for one month to get an idea of what you’re spending each month. Continue this practice so that you are always aware of the health of your spending and saving. When you know where your money is coming from and where it is going, you may find it a lot easier to plan your finances so you can save that 10 to 20% of your income.
Many times when we think of saving, we see ourselves making huge sacrifices. But although sacrifices will undoubtedly have to be made, they don’t have to be quite as dramatic as you would think. It is possible to buy some of the things that you would prefer and want with a little bit of ingenuity. Make use of coupons, discounts and member pricing. Many retailers offer loyalty discounts and most manufacturers issue coupons. Combining discounts and waiting for larger or more expensive purchases to go on sale can save you tons.
It is important that your money isn’t idle. You want it to be somewhere it can grow while it sits. Investing is one of many ways you can keep your money actively growing. When you start investing your savings, start with simple instruments. A recurring or fixed deposit will do. Pick readily available options that are in a bank. Do your own research or consult a professional so that your investments can do what you need them to: pay you, whether it’s short term or long term.
Now that you know how to create and free more money for saving, you will more quickly have a comfortable rainy-day fund. Being financially secure can reduce some of the stress you experience. And when surprises arise, you’ll be able to meet them confidently.