1. Pay yourself first
Save part of your monthly income as soon as you get it, rather setting aside whatever’s left over.
One way to make paying yourself a priority is to set up automatic transfers from your bank account to a savings account or investment account.
“Take a percentage of your paycheck or a random number and have it done automatically. Don’t think about it. Don’t go back to it. Just have it done,” says Ronit Rogoszinski, CFP and founder of Women+Wealth Solutions in Carle Place, New York.
2. Save for emergencies
An emergency savings account is the foundation of a sound financial plan. But what exactly is an emergency?
A true emergency is something you have little-to-no control over, such as a major illness or job loss. An infrequent expense that you can anticipate, such as a car repair or traveling to visit family, isn’t an emergency but rather a separate category of expense that also should be saved for.
A general rule of thumb is to save enough to cover three to six months’ worth of expenses.
If you have a habit of dipping into your savings when you shouldn’t, move those funds to separate savings accounts so the funds won’t be depleted when you need them.
Less than half of U.S. households have enough savings to cover a surprise $1,000 expense, according to a recent Bank rate survey, which found that many feel inflation is impacting their ability to save for emergencies. A general rule of thumb is to save enough to cover three to six months’ worth of expenses.
If you have a habit of dipping into your emergency savings when you shouldn’t, move those funds to a separate savings account so they won’t be depleted when you need them.