We all know we need a "rainy day fund" – and well, it's raining right now. However, it is possible to continue to save when it's raining, and it's wise to do so in case of a downpour in the future.
Over the last few months, if there's one thing we've all learned, it's that we never know quite what's around the corner.
Saving is one of the best ways to prepare for future uncertainty. We can become motivated to save when we consider how important and valuable it would be to have $1,000-$2,000 set aside if our income becomes uncertain – and many of us could do with that right now.
Even in tough times, it's still possible to save
Many people struggle with savings. In fact, 31% of Americans have less than $2,000 in emergency savings1. To get into the habit of saving, you need to find the right balance in your spending — even if it's on the basics — and understand what your monthly expenses are in relation to what you earn.
Having this perspective will help you determine where you can make cuts to your spending to benefit your savings. And what better time to do this than right now, when you're re-calibrating your entire spending habits?
Make the leap from spender to saver
Think of saving as "future spending." After all, the main point of saving money is to have access to spend it at a later time.
To start with, focus on where your money is going. Pull up your latest credit card or bank statements, and review your spending. Look for recurring transactions or any non-essential expenses you could temporarily reduce or eliminate.
Then automate savings by creating an auto-transfer for that amount into your emergency savings account.
A common misconception is that overspending is caused by splurging on the finer things in life, but that's not always the case. You may be spending way too much on the basics. Take groceries for instance. Could you cut back on some items? Are you throwing away food? Do you need those specific brands, or could you purchase cheaper alternatives? You'll be surprised how much you could save immediately.
Setting a target
If you're new to saving, aim to save $1,000 and work towards having 3 months' living expenses. You should then start setting yourself goals of what you want to save and align these goals to your values.
We can't predict what's happening in the future, but with a rainy day fund, you can be sure you're ready for future storms.
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