At NDCAP we preach many of the fundamentals from the Four Cornerstones of Financial Literacy. Here is just a snippet that shares some tips for your savings plan:
Pay yourself first. If you put money into savings every month, you will find a way to live on the rest. Start small and increase your deposit, as you feel more confident. Be ready for life’s surprises. Budgets work only if you put money away, so you don’t have to go into debt.
Here are five ways to make savings a habit:
- Save all your loose change in a jar and when it’s full, deposit it into a savings account.
- Set up auto-transfer to move money from your checking into savings account monthly.
- See if your work will directly deposit your paycheck – some to checking, some to savings.
- Once you pay off a loan, keep paying that amount – to your savings account instead.
- Put all extra money (bonuses, tax refunds, gift money, rebates) into savings.
There are three layers of savings that you should try to build:
- Layer One – a put-and-take account for periodic expenses (like car repair and holiday gifts)
- Layer Two – an emergency savings account used just for the unexpected or for goals
- Layer Three – retirement savings (in long-term, tax-deferred plans like IRA or 401K)
If You Can’t Pay All your Bills this Month, PRIORITIZE.
- Start with food and medical essentials. Groceries are essentials, but meals out are not. Doctor visits or prescriptions to treat medical problems are priority, but paying old doctor bills are not. (Eventually, you must deal with these, but they are not the top priority).
- Next, pay your rent or mortgage, and critical utilities. You need to pay heat and electric and water to prevent shut-off, but other utilities like phone, cable, cell phone, Internet, and storage are not. Cancel those and make plans to pay the old bills later.
- Then pay your essential insurance premiums. Medical insurance and auto liability insurance are essentials. If you own a home, homeowners insurance is essential (renters insurance is not). If you still have a car loan, auto collision/comprehensive insurance is essential (but not if it’s a paid-off car).
- Then pay your secured debts (car loan) so it will not be repossessed. If you have a good payment history, ask the lender if you can skip a month or tack a month onto end of loan.
- The last priority is unsecured debt (credit cards, medical bills, book clubs, donations). Don’t let debt collectors scare you into a bad decision – just make a plan to send them some small payment each month, and do not give them your bank account number or any post-dated checks.
- Stop making any new debt (no credit cards or loans) and use a cash flow chart to see when money is coming in and what to pay out of each check.
More information is available on our website: https://www.capnd.org/resources