People in a healthy financial situation understand the importance of saving money. People in an unhealthy financial situation do not place a value on savings. It’s that simple. As you consider your own financial situation, consider how your own savings account looks. What are your habits? What decisions are you making to set yourself up for success when it comes to savings?
The goal of saving is to make sure that you have what you need for when the unexpected occurs in your life. The old adage, “It’s not if, it’s when” applies perfectly in this scenario. The unexpected will happen. Your car will break down. Your dishwasher will break. You’ll need to make a big unexpected purchase. Your income will change. Any number of scenarios can and will happen in life that will impact your life.
How you’ll financially navigate those situations depends greatly upon the amount of money have have set aside.
Exactly how much money you should have set aside for a rainy day depends on the research you do and the sources you consult. Most good financial planners throw out a variety of numbers, telling people to set aside anywhere from 10% of monthly income to 50%. The goal is to set yourself up with enough of a savings account that you do not need to rely upon credit cards when the unexpected happens.
The truth is that if you’re not currently setting a determined amount of money aside each month, it’s time to start. It’s not about how much you save - at least not initially. It’s about developing healthy financial habits.
Even by setting aside a seemingly insignificant amount of money each month, you’ll begin to build healthy savings habits into your life. Designate the money you save as “untouchable” for your regular monthly expenses. Transfer it to a separate account. Withdraw it and put it in an envelope. Do what you need to do to get the right habits in place in your life.
The ultimate answer is that there is no magic number when it comes to how much you should save, because the level of “emergency” you encounter will vary from minor household repairs to major investments. But a lifestyle of savings, understanding that you shouldn’t spend everything (or more) than you make each month, is the difference between financial opportunity and financial frustration.
