4 Reasons You Need A Savings Cushion
No one can control when an emergency happens, so it’s important to have a savings balance to address an emergency, such as a car repair.
We know that a savings account can improve our personal finances, but it’s hard to take action. We daydream about what we can do with an account filled with savings, and we make as many deposits as we can for those ‘just in case’ moments. We save our money because we can’t predict what’s going to happen in the near and the far future. Having a savings cushion can help you out when life goes a little awry, as it often does.
Contents
Dealing With Risks
Without having savings, you leave yourself open to issues and risks in your life. What would happen if you lost your job and couldn’t make the mortgage? What would happen if your furnace broke down in the middle of winter and you didn’t have the savings account there to rescue you? What would you do?
These aren’t just hypothetical questions, and unless you have a savings account, you won’t be able to face an emergency.
Get free sample chapters from my book: Not Another Personal Finance Book.
How You Benefit
You may already have a savings account started, and there are a few reasons why a savings balance can improve your personal finances:
- Retirement Planning: A lot of people have a pension, but alongside it they create their own investment portfolio. You can fund you retirement with monthly transfers from a savings account.
- Emergency Funding: Furnaces, mortgages, car repairs – they all cost money! You need cash just in case, and it’s smart to set aside money each month to handle a potential emergency.
- Legal Issues. If you have a legal issue, you may need the services of www.Bourdondefence.com/dui-lawyer-calgary/ to help you out. Without a savings account, you won’t be able to pay for professional representation in times of legal need.
- Education: Whether for you or your children, you need to think about how you want to pay for education. If you want to start contributing to a college fund, a savings account is a good place to start. For example, you could move savings account funds into both a retirement plan investment and a college fund.
Only you can decide how much to save each month, and it’s important that you develop your budget to include a portion going to your savings account.
How To Save
Look down all your expenses and make smart decisions to reduce your spending, such as cutting out those coffees every morning from the local coffee shop. At $5 a time, you could be saving an additional $150 a month and bring your own coffee instead.
Implementing a savings plan is easier, if you avoid spending unnecessarily and put a monthly budget in writing. It’s important to know where your money is going, and including a savings account can save you from a lot of heartache later on down the line.
Find a Tool
There are some great mobile apps that you can use to set up a monthly budget, fund a savings account- and stay on track. If you’re not a tech-savvy person, try keeping notes on your spending in a notebook, or use an envelope system to plan for your spending in cash.
Give it a try- you can do it.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl
Image: Bullseye, Jeff Turner CC by 2.0