So, you are on your way home from work reflecting on your day. Large raindrops are hitting your windshield due to the torrential rain that just started moments before you made it your car. Your thoughts are plagued by brief confrontation you had with a co-worker in the breakroom. This individual is always rearranging the lunches in the refrigerator. Well, today, you let him have a piece of your mind. As your mind lingers in the ambient cloud of your thoughts while becoming periodically distracted by the tic toc motion of your windshield wipers rubbing on the glass, BOOM! You are rear-ended.
You snatch your seatbelt off, throw the car in park, and catapult yourself out of the driver side door. Looking at the damage you realize you are going to have to pay deductible because the whole backside of your car is smashed in. Your thoughts immediately turn to your finances. The problem? It’s Monday. You don’t get paid until this coming Friday, and you are broke due to your weekend shenanigans.
According to CNBC and Bankrate.com, the average thirty-four-year-old single person (with children) has about $1,350.00 in a savings account. This is a national average. Unfortunately, for our individual mentioned above, she has no dinero, no cash, no moolah. She will probably have to drive the rest of the week with her car smashed in until she can get the money for her deductible.
Bottom line: We need more money in our savings accounts. Not just for rainy days and accidents, but for any incidentals that make their way into our hectic lives.
Here are FIVE ways to boost your savings and safeguard yourself from emergencies!
1. Learn to live off 80% of your income
This does require some adjusting, but you can make it work. You may have to reduce your spending habits in certain areas. For example: entertainment, expensive clothing, unnecessary spending. You will need a budget to accomplish this, but in one year, the yields outweigh the sacrifices.
2. Make your savings automatic
Just like your retirement savings that come directly out of your pay check, you can make your savings automatic. Take the remainder of the 20% of your paychecks and have it allocated to savings account. You don’t have to do the whole 20%, but you get the point! You can have your direct deposit directed to multiple accounts. If you are self employed and pay yourself, set up a sweep account to have funds automatically extracted from your account to be deposited in another account. It works, trust me!
3. Open a savings account at another bank that you won’t use (No Bank Card)
Usually when we have online banking, transferring money from savings to checking is too easy. If you are having lunch or at a bar with some friends and your funds are low in your checking account, you may check your phone app for your savings account and do a transfer. By having an account at another bank, you provide yourself with some roadblocks to get to your money. You may reconsider extracting money from your other bank because you realize it is strictly for emergencies.
4. If you are using a check register, round up all your change
I found myself using this technique several years ago. If you still balance a check book, always round your transactions up. Those pennies and quarters add up quickly. Doing this for a year and you can build up excess cash in your checking account, then you can move it to that savings account that you have across town.
5. Direct raises and commission checks to savings automatically
If you are a person that gets commission checks regularly and live off your salary, allocate a portion of your commissions to a separate account as well. Many employers can preset certain percentages for commissions to specific accounts. Ask your HR representative about this feature.
Leveraging tactics like this can be very simple to implement. Emergencies happen all the time and being prepared with cash on hand can be a lifesaver. I dare you to try one of these methods for a year. If you do, shoot me an email or comment below. I want to know how empowered you will feel!