Saving money each and every single month is a critical step in becoming financially secure. You need to stop living paycheck to paycheck, by spending every single dollar you make. You can create a budget and plan that assigns every single dollar, but I don’t want you to spend every single dollar!
You want to have a savings account beefed up with money in it to save and use for when an emergency happens, not if but when. This money will save you from going into debt when an emergency arises, like an emergency room visit for a broken arm, or a gallbladder surgery, or a car accident. Don’t get caught off-guard with no savings.
My husband after having surgery to remove his Gallbladder.
So, how much money do you need to be saving per month? That is the golden question, isn’t it? Most financial experts will tell you to save 20% of your household income. This money would be saved into your retirement accounts, and also your short-term and long-term savings goals and your emergency fund.
I know what you are thinking, “Is she serious? 20% of my monthly paychecks? That is a lot of money! I can’t afford that!”
If these are your thoughts, I suggest starting somewhere, anywhere, and just start saving money.
I personally set up my savings automatically, so my money goes from my checking account to my savings accounts and retirement accounts automatically every single month. I get to set it once and forget it. I don’t have to do anything else and I am meeting my savings goals.
I also have my savings accounts at Ally.com, an online bank, that is safe and secure, it is FDIC insured. I have a high-yield savings account (HYSA) where I get a higher interest rate back on my money stored there than I do at my local bank or credit union. This is because the online bank doesn’t have physical “bank branches” buildings that they need to pay for. So, their expenses are lower and they can offer higher interest on your money.
I recommend my clients use an online HYSA bank as well, because it helps prevent you from dipping into your savings for non-emergencies and for your day-to-day spending. I don’t want you to be at the store, see a new pair of cute shoes or a new outfit for your baby and transfer money from your savings account to your checking account to purchase these items. This is easy to do when your savings is attached to your checking account.
By having your savings in Ally or at another online bank, it is another step to take to get your money. It is easy to get your money transferred from ally (or capital one) to your local bank/credit union, but it takes a couple to few business days for the transfer to complete. So it helps prevent impulse purchases!
By automating your savings, you will be a step closer to meeting your goals. You will be one step closer to financial freedom. You will be one step closer to an enjoyable retirement. Even if you can start with saving $25 each month that is a great start! I then encourage you to commit to increasing this amount every few months if possible.
By tracking your spending, creating a budget, and sticking to it, you will be amazed by 1. How much money you are spending on silly things you don’t need 2. How much money you can save per month 3. How much you can cut back on.
Don’t worry, you don’t have to track your spending forever unless you are like me and you want to because you enjoy it!
I tell my clients to plan to track their spending thoroughly for at least 3 months to get a good picture of their spending habits, what they spend money on, and how much money they spend in each of those categories.
There are also other types of budgeting methods where you don’t have to track your spending long term. The 50/30/20 budgeting method is a good example. I wrote a blog post about what this budgeting method is and how it works, https://www.jesswaynecoaching.com/blog/the-503020-budget-method you can read it here.
Your emergency savings account should have at least 3-6 months worth of monthly expenses in it. Again, this money is just sitting there and is to be used ONLY for a true emergency. Do not use this money for that new laptop or phone you’ve been eyeing up.
When you start saving into your retirement account(s), your future self will thank you. Seriously, you need to save for your future. I’ve worked with way too many patients as a hospice nurse, who didn’t save enough into their retirement and they are regretting it 100%. Your living options, nursing home options, travel, food, entertainment, etc. are all limited if you don’t have enough saved for your golden years.
I am not a financial advisor or retirement specialist, but a good rule of thumb is to start with an employer 401k or 403b match (if you have this option available to you), then max out a Roth IRA. You might have other options as well, and you can also do a traditional IRA, look into rental/property real estate, etc.
Again, just getting started somewhere, with your employer match or Roth IRA, and putting aside $25 or a few hundred dollars a month automatically is great. I personally have my employer match which I do a percentage of my gross income, and then I max out my Roth IRA. We are looking into getting into real estate but haven’t yet.
Next, think about planning ahead and looking at your short-term and long-term goals and start saving for those. Think, Christmas Christmas-related expenses including additional food, travel, and gifts. I save $100 per month into our Christmas savings, so come December I always have $1200 to spend on Christmas. I also add to this account throughout the year to beef it up.
What other short-term savings goals do you have or want? Typically these are things you are saving for a year or less. Some of mine are back-to-school shopping (I start this account in the spring), Vacations, Birthdays, Car Maintenance, Car Repairs, etc.
Long-term goals would be those greater than a year, think house down payment, college, wedding, second home/cabin, home remodel, new car, car for your child, etc.
You can figure out how much to save (ideally) into each of these accounts by taking a rough figure of what you want in the account by a certain timeframe and dividing that by the number of months you have to save for the goal.
For example, let’s say, your child is getting close to driving age and you want to buy them a car using cash. You decide 9 months before they are turning 16 you want to save for their car that you are willing to pay $4,500 for. Take $4500 divided by 9 (months) to equal $500 that you will need to save per month for 9 months to meet your goal of $4500.
I want you to start thinking ahead for future expenses that you know will be coming and start planning for them now so that when they are due to be paid you already have the money, or most of it, and you aren’t stressed over the bill.
Yearly auto registrations, yearly subscriptions, and things that are due every 6 months or quarterly (hello water bill), start saving now for those expenses.
Yes, you will be saving a lot of money, but that is what makes you become financially FREE! I don’t want you to be working so hard and paying the credit card companies or car/boat/camper loan companies any longer. You’ve done that enough, they’ve taken enough of your money. Stop paying them and start paying yourself!
Speaking of paying yourself, this is how I set up my monthly budget. I pay myself first, every single month. The first category to go onto my budget spreadsheet is my Roth IRA, boys UTMA’s (savings accounts), and our emergency savings, every month these are funded automatically. Then come my needs, and necessary expenses like groceries, housing, utilities, fuel, etc. Finally, I put in our day-to-day discretionary spending like our dining out, clothing, subscriptions, fun money, etc.
So, reach for the stars with your savings goals. Create the life you want to live. Plan ahead, automate your savings, and strive to save 20% of your monthly income. But give yourself grace if you aren’t able to meet 20% right away. Keep working hard to make your dream life a reality.
Be sure to follow me on Facebook and Instagram. I also have a free budgeting 101 online course, podcast, and also paid services like my Deep Dive Budgeting Session, and my exclusive 1:1 Financial Life Coaching Program. Be sure to check them all out at, https://www.jesswaynecoaching.com/
Remember, you matter, you are enough, and it is never too late to pivot in life to create the life you WANT to live.
XOXO
Jess Wayne
