Make lifestyle changes that will make your healthier and richer. If you use tobacco or drink, think about how much money you spend on those habits. You must also include health care expenses that are related to those habits. If you look at the big picture, you will find that your unhealthy habits cost a lot more than you realize! Break those habits and you will not only become healthier, your bank balance will be healthier as well. Don't always buy the cheaper brand or version - it may cost you more money in the long run! On the other hand, sometimes buying off-brand items can be a real savings, especially when it comes to food items. But sometimes, cheaper means lower quality. This can mean replacing items more often, which in the long run costs more money than just buying a higher quality item in the first place.
If you make a list of things that you commonly spend money on, and if you really think about it, you will find numerous ways to save money. Take those savings, and put them in a savings account, and you will be pleasantly surprised at how fast that balance grows! Adopt the attitude that saving your money is as important as making money. There are many high earners who live a flashy lifestyle by going into debt up to their eyeballs. It's a shame these 5-figure (monthly) income earners often don't bring those 5 figures home at the end of the month due to horrible financial planning.
While savings is not all you need to know about personal finance, it's a quick defense strategy you can implement almost instantly. Do the best you can with what you have. Remember the sage advice: "Pay yourself first." (We'll have more to say about this in subsequent sections.)
Accumulate an Emergency Fund
Life throws things at us when we least expect it. It may be an illness, a car accident, or even a lay-off from your job. When life throws you an unexpected curve, it's likely to cost you money. This is why you need an emergency fund. Everyone should have at least three to six months of living expenses in a savings account that is reasonably easy to get to.
Saving up the money for your emergency funds is easier than you might expect. It all goes along with "Pay Yourself First." Set a budget and determine how much you can put into a savings account. Until you have reached your savings goal of having three to six months of expenses in your savings account, save every extra dime that you can lay your hands on - even if this means not going out to a nice dinner or seeing a movie. Getting your emergency fund saved should be your highest priority. Once you have your emergency fund, preferably in an interest bearing pass book savings account, make sure that you leave it alone. Remember, it is only for emergencies. Needing to buy a new dress for a date is not an emergency. Needing to pay for car repairs, however, is an emergency.
Really think long and hard before dipping into your emergency fund!
When you must use your emergency fund, make sure that you replace the
withdrawal as quickly as possible. This will again be your first priority until
the fund is replenished. This may mean that you will have to really tighten
your belt, and forgo the dinners and movies again - for a while. But when
you have an emergency, you will be thankful that you did save the funds,
and you will realize just how important doing so really was.
Your emergency savings should not be invested in the stock market or even
a certificate of deposit. It needs to be readily accessible in a savings account
or money market fund. If possible, get a debit card for that account, in the
event that your emergency occurs outside of banking hours.
However, use caution, and put that debit card away - don't use it unless
there is an emergency!
And that reminds me...