Emergency Savings and Paying Yourself First

Over the weekend, I went to a personal finance seminar. One of my friends and business partner invited me. I almost didn’t make it to the event. Before I set myself to go, I had thoughts of not going and I was also thinking that I was going to learn information that I knew anyway. Then it hit me! Repeptition is the father of learning. I need to keep filling my mind and reminding myself of what needs to be done. Who knows, I may pick up something new at the seminar. In fact, I did learn something new when it comes to saving money. I learned the difference between paying yourself first and saving for emergencies.

“The wise have wealth and luxury, but fools spend whatever they get.” Proverbs 21:20

Pay Yourself First

Average people go through life and handle their money by paying all of their bills first, then try to save what is left over. We pay everyone else except for ourselves. This is where a mindset shift is needed. Why is it important to pay yourself first? To have money for future endeavors. You need to be in position to invest in business opportunities, stocks, bonds, 401K, etc. I would rather be ready than be in regret. It is recommended to pay yourself 10% of your gross income. Of course God gets his 10% too!

Back to what I said about mindset. It may be tough at first to start doing this task because we are not used to it being done. Fear may step in and try to keep you from doing it. This is where faith steps in. You must see it before you see it. Basically, you must know in your heart the results and use action to get there.

Emergency Savings

This should come out of the other 80% of your income. This is the big nugget that I received from the seminar. It is critical to save for the unexpected. Things like:

  • Flat tires
  • Broken water heaters
  • Car breakdowns
  • Random medical attention needed
  • Etc.

You should start off by saving $2000 as soon as humanly possible. The overall goal is to save 6-12 times your monthly income. This extra money to put in this fund can come from overtime, random checks in the mail, gifts, yard sales, etc. This is also where a tough mindset is needed. Extra money doesn’t always mean to go splurge. We should be responsible and have fun at the same time.

I also learned another saving tip. Name your savings accounts. You need to tell your money where to go. Examples are:

  • Investments
  • Emergencies Only
  • Vacation
  • Christmas
  • Birthdays
  • Anniversaries
  • Whatever else you’re saving for.

Money management is important. Saving is important for future needs. A mindset shift is needed first before action can be taken. For more information on solving financial problems, check out Dynamic Financial Training.

 

Make it a great day!
jay the analyst and kendra foster

Jay The Analyst

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