Whenever I have a conversation with someone about personal finance, one of the first questions I ask them is “Are you saving?”
I usually get some variation of:
- Yes, but not regularly
The variation I almost never hear is “Yes, I save a percentage of my income regularly.”
That’s because most people try save what’s left after they’ve paid their rent, student loans, credit card bills, etc. Unsurprisingly, there is rarely ever any “extra money” left over for saving. The key is to save before you spend your money on anything else. Yes, even debt. This method is call “Pay Yourself First.” By paying yourself first, you are re-prioritizing your expenses, placing savings as your first priority instead of your last. More often than not, people will see that by making this one simple change, they are able to save consistently without having to change anything else about their lifestyle and more importantly, without getting further into debt.
Action Item: Decide on an amount you want to save per paycheck and start putting that money into your savings account as soon as you get it. If money is tight then start small like saving $25 per paycheck. And don’t forget the key is to put that $25 (or whatever amount you decide on) into your savings account immediately. If you’re an advance saver, your goal should be to have enough savings to cover 3-6 months worth of expenses.