Building savings isn’t as easy as it should be.
With little cash at the end of the pay period, coupled with other financial obligations like debt, loans and bills, building significant savings can be tough.
It’s an important financial step, most financial experts agree, and can be accomplished with a sound strategy and a lot of discipline. Here are four ways to build savings:
Consider yourself a creditor
No one enjoys paying bills each month, but it’s a fact of financial life. Ignoring bills will hammer your credit report and the ability to buy on credit, including renting an apartment or buying a home. You’d also lose conveniences such as electricity, water, Internet access, cell phone service and cable TV.
In reality, ignoring the urgency of building savings has the same very dire consequence, yet very few people realize the need to make it a priority until disaster strikes.
Consider the shift in the collective American consumer consciousness in the midst of a “bursting” housing bubble and financial crisis: The personal savings rate among Americans reached nearly 9% in early May of 2008, a level not seen since 1985, according to data reported by the U.S. Department of Commerce.
Unfortunately, the fear of living on borrowed cash appears to have waned. Today, personal savings rates are back down to about 4%.
Financial experts recommend that all people, regardless of age or income, have at least six months worth of income saved.
Act like a creditor when it comes to savings, and demand a reasonable amount of money from each of your paychecks until you reach your goal balance. Your credit card issuer doesn’t require that you pay your balance in full each month, but you must make a minimum payment on what you owe, until the debt is resolved.