In an interview back in 2006, a famous economist was asked “where do you see the world in 5 years”? His reply, “teetering on the brink of economic uncertainty”. Well, guess what? He was right. In recent days, we’ve seen a number contributing factors that may point to another financial crisis, including the troubles in Europe, Asia, and of course; a growing sense of uncertainty in America’s financial future. If proven correct, it may just lead to another financial crisis that mirrors 2008. For an already chaotic backdrop this may prove to be disastrous, if not overly damaging. So how do we protect ourselves from this growing uncertainty? Here are some quick tips designed to save you money.
Bank what you can
The first tip is usually the most basic, ‘Save what you can’. According to recent survey by ‘Time Magazine’, hundreds if not thousands of potential retiree’s had either done one of two things: Forgot to save enough money to retire, comfortably, or have very little to show from years of hard work. So what happened? Here’s what they came up with: The most common response was “I didn’t know how much to save”? Followed closely by ” I became complacent”, or “I thought Social Security would cover it”, and the biggest excuse of all “I’m going to work until I die”. Wow, that was quite the list. For the 80% who responded negatively it may seem a bit comical, but for the other 20% it makes you wonder ‘What can I possibly do to save more money’?
Setting aside extra money every week is a good place to start. Even if that amount equates to no more than 25 dollars a week is better than saving nothing at all. There are a couple of key factors that may limit the amount of money we can actually save, including; earning potential, financial savvy and even frugality. If we’re not considered one of the top earners in our perspective fields, then you may want to consider a more healthy alternative, like; limiting the amount of money we actually spend, or at the very least spending less money than you actually make. Either/or should always be our first priority. So whether you’re trying to improve your family’s finances, through traditional outlets like CD’s, treasury bonds or maybe even a high interest savings account, or you’re trying to balance your checkbook, always prepare for the worst. Furthermore, if we can save an additional 50 dollars a week, it can make the future look that much brighter.
Having a rainy day fund
It’s been recommended that you save at least 6 months worth of income in what is commonly referred to as ‘rainy day fund’, just in case the well runs dry. I prefer a more realistic number, like 8 to 12 months instead of the usual six. That way I can balance my checkbook correctly. If those numbers seem unrealistic, then try some figuring of your own. Whatever you can save to help alleviate the stress of losing your job will always pay off in the end. If that equates to 1 or 2 months instead of the traditional 6, then so be it. Again, it’s whatever amount you’ll need to keep the household running.
Invest in your future
Developing a simple investment plan will always prove worthy in the end. Now I’m not talking about stocks, ETFs (exchange traded funds), or riskier investments like derivatives, no, I’m talking about you. Yes, you heard me correct…you. The greatest investment we can make is in ourselves, plain and simple. So how does that equate to finances? Simple, actually; the more we believe in ourselves the more confidence we actually gain. Case in point: Famous inventors, Thomas Edison and Ben Franklin. Both of whom failed miserably their first time out. In fact, they failed so many times that you got to wonder ‘how the heck did they become so successful’? Well, it all boils down to one key element… determination. Basically, they never gave up. So ask yourself this: Have you ever made a bad financial decision? And how did that play out in the overall scheme of things? I bet a great deal. Let’s face it: If we’re going to be successful, which should include ‘investing in our future’, then we need to take some risks. Does that mean taking financial risks as well? No, of course not. In layman’s terms, it means developing a sound economic strategy, even if that strategy only amounts to dollars not millions. The more we save the better off we’ll be.
Planning for retirement
The challenge here is to determine how much money you will actually need before retiring. Now for some of us that might equate to right around 5 or 6 thousand per year, given our income, but for those individuals who have a greater earnings potential, well, that amount should be much higher. Again we should save as much as we can. Yes, there are limits on how much we can actually save, but we can always set aside extra income just in case. For example, a traditional IRA is a very wise investment and so are annuities. In most cases; they can provide us with the additional income ‘we’ need to offset the cost of retirement. So do your homework and, again, save as much as you can. Our efforts will never go unnoticed and either will our wallets. And that’s something we can always look forward too.
So here’s the bottom line. Whether we’re planning for our retirement or saving extra money for a rainy day; we all need to make sacrifices. I just hope you’re up for the challenge. For a better understanding, contact your local bank or get in touch with a certified financial planner. They can help you plan correctly.