What is your ability to cope with a financial emergency? Could you access $2,000 within a month’s time? From family, friends, credit cards, savings, or other sources? Not how much cash do you personally have on hand but how much could you scrape together, say, to fix a broken car or handle medical bills or other emergency?
Surprisingly few Americans could, according to the Personal Risk Assessment and Risk Literacy Survey by research firm TNS in conjunction with Harvard Business School and Dartmouth College, as reported in the November 16, 2009, issue of Business Week. Forty-six percent said they “weren’t confident” they could. Even more surprisingly, almost 25% of Americans earning $100,000 to $149,000 a year doubted they could raise $2,000 in a month in an emergency.
Savings are like anything else: Some people have a million reasons why they can’t when all they need is one reason why they must. Americans spend a significant amount of money on relaxation, on feel-good things, on brand names.
One key to savings is to make a game out of it, to learn to derive a sense of satisfaction, even enjoyment out of the increased security, independence, and resiliency that a good savings account can bring. Three month’s wages, even six month’s wages, a paid-off mortgage and paid-for cars: all are good targets that will enable you to sleep soundly in the direst of economic times.
Remember: So easy when we want to, so hard when we don’t. Argue for your weakness and it is yours. No excuses. Forget the million reasons you can’t, find the reason you must.
I started to save, REALLY save, (not counting what I was contributing to my 401k) and now I’ve got something in the neighborhood of a few month’s salary socked away which I can get to in the event I need it. It feels good to know there is essentially nothing that can come up that I can’t handle myself, financially speaking of course.
I found the key to saving was to make it automatic. I took advantage of my bank’s automatic transfer of funds on pay day to a separate account so the money I’m saving was out of sight, out of mind. I found that I spent as much as I did in the past because I’d look at my account balance and say “oh look, I’ve got an extra $500 in there I can blow this week” and that wasn’t constructive behavior. I knew I needed to keep a reserve so I could maintain my independence which I value much more than spending that money on frivolities.