4 Ways to Sabotage Your Personal Savings

Has a personal savings account has lost its appeal in an age of credit cards and second mortgages? In a culture where instant gratification is king, setting aside a chunk of money for the future is not the “cool” thing to do. Yet, this one thing alone can determine your financial success or failure health in the future.

If fiscal fitness is not important to you, here are a few rules to follow that are certain to lead to the end of any financial security:

Rule #1: Do Not Have an Emergency Fund

Sadly, most Americans today do not see the importance of a set amount of money in the bank simply waiting for something that may never happen. A sudden illness. A job loss. A flood that leaves your home as nothing but your life preserver.

Sure, you never plan these things. They just happen. They are a little something called “life” and they are just lurking around the corner, threatening to steal your economic freedom.

Here are a few simple guidelines to help you set up an emergency fund:

- Save 3-6 months worth of living expenses. This amount will not only help you in a personal crisis, it also serves as insurance if you unexpectedly lose your job.

- Create up a separate account to isolate this money so that it is not easily used the next time you impulse buy with your debit card.

- Make automatic deposits into your emergency fund so the temptation to “forget” saving each month vanishes.

Rule #2 Nix the Budget

Few things guarantee a poor savings account. A lack of a budget, however, pretty much promises that your saving account will never reach its full potential. The act of using a budget forces you to live within your means and creates an automatic habit of saving monthly.

Tips to creating a budget include:

- Track your monthly expenditures for 6 months. This gives you a clear picture of how much you need to allot to each category in your budget. It also shows you how much surplus you really have that you can put towards your savings.

- Record all sources of income. It’s easy to just think about your weekly pay check your employer gives you, but what about that $20 Grandma gives you when you see her each month? Look over each amount of income you have during the course of a year and figure it into your budget.

- Make a list of monthly expenses. Break them down into fixed, non-negotiable expenses (mortgage, car payment, etc) and variable expenses (occasional doctor visits, car repair, etc) and set your monthly budget up to reflect these expenses.

Rule #3: Ignore the Habits of the Wealthy

Studying the habits of the well to do actually can teach you a thing or two about how to get where they are. One common denominator that many of the wealthy have is a stash of cash in a bank account. In reality, it does not matter how much you earn that makes you wealthy, it’s how much you have in your bank account.
If you spend untold amounts on disposable items such as fancy dinners and clothes that have no lasting value, you are not truly “rich.” If you spend time setting aside money for things like investing in real estate or stocks, wealth takes on a whole new dimension.

Here are a few common traits of the wealthy:

- They invest or build a business. This grows their money exponentially.

- Being innovative is the name of the game of for the elite. They are always looking for a way to increase what they already have.

- They give back. The rich recognize the concept of the more you give, the more you receive. Of course this is difficult if you do not have anything to give!

Rule #4: Don’t Let Your Money Work for You

The fact of the matter is having money sitting a savings account can actually make you more money. But, how is that possible? The most obvious answer is interest. If you find a good savings account with a stellar interest rate, your money will actually work for you. You do absolutely nothing while your money works away multiplying itself.

Some other ways to make your money work for you:

- Invest in things like stocks and bonds with considerable research beforehand and watch your money multiply.

- Take a leap into real estate by investing property. If done right, this investment can take a small amount of money and turn it into an insane amount more in a short time.

- Research money market accounts and CD and maximize your interest rate.

Maybe a secure financial future is not bad of an idea, right? There are a few simple pitfalls to avoid and be among the economically secure rather than the fiscally devastated. A little help from someone who knows how to help you stay as fiscally healthy as possible is not a bad idea either. Contact me at terry@terrywilliams.com if you have any questions.