Hello viewers of the PeoplesBrain Blog,
Saving money is probably one of the most important habits in life for any person to practice. It can enable alot of great things to happen for you, while at the same time prevent alot of bad things from happening to you. What baffles me the most is how many people I meet whom not only don’t practice good saving & budgeting practices, but have zero dollars in a savings account. Such news is quite disheartening as I’ve been there before and can only recall the horrible experiences that came out of it when sh*t hit the fan.
I grew up with a mother who kept a pristine track record when it came to credit and proper money management. She used to always tell me that “saving money is as essential as eating” and it wasn’t until I became an adult myself when I realized the importance of her advice. In this generation, especially my generation; we younger adults tend to blow our last bit of money on miscellaneous, unnecessary items only to enjoy them for one minute and then let them collect dust the next minute. And then we complain about “money problems” when we fail to remember that we are causing the problem. We receive our weekly/bi-weekly paychecks and after all the hard-work we endured to earn it, we get excited on payday and blow the rest of our paycheck after or even before the bills are paid; instead of investing in OURSELVES. This is the biggest mistake we make repeatedly as it provides us with NO backup plan in-case things go downhill. What happens if you lose your job all of the sudden? What do you have to fall back on during the search for a new one? With the way the economy is, anything can happen at anytime and I feel that it is mandatory to prepare ourselves financial for the unexpected nonetheless.
One day I was doing some research and came across this post on Reddit that completely put things into a much more clearer perspective with this topic. Not only did I find the information shocking, but it alerted me with a “wake up call” in regards to the way I manage my own money. Now, I strive to be part of the 38% of Americans who have $1,000+ saved in a savings account.
There are literally hundreds if not, thousands of guides online that can help anyone save and budget to the max, no matter what income bracket they fall within. For example: I started with this guide on the Mr Money Mustache (MMM) website which gave me an excellent jump start to proper money management. From investing, to choosing the right savings account, to $10 cellphone plans- the guy who runs the blog is very well known for giving sound financial advice to all crowds both young and old, and provides the readers with recommendations of financial tools to help manage and organize their finances in the most hassle free & efficient way possible.
With that being said, many of you are probably wondering how I myself save money and I’d love to share how I do it. Me personally, I like to have different accounts setup for different goals. You can view how others do it by viewing this highly informative reddit post here. I have always believed that having an emergency savings account is one of the most important decisions a person can make in the first stepping stones of saving money. This is what I call, a “Set and forget” account. Your emergency savings account should be the account that you transfer the largest percentage (that you set) from every paycheck you receive. Whether it’s 10% of your paycheck or 60% of your paycheck, whatever it is, you should have it to where it’s a-u-t-o-m-a-t-i-c-a-l-l-y deducted from your direct deposit and transferred to your emergency savings so that you can forget about it. So to put this into perspective, if you make $400 a week and want to transfer %50 of that every week into your emergency savings account, have it set to where you bank AUTOMATICALLY transfers $200 of your paycheck to your savings so that at the end of every month, you would have saved an extra $800, and $7200 by the end of the year. On an income like that, you should have no problem being able to afford your bills and living expenses even after the savings as it would leave you with $800 for such expenses. Now of course there are different factors to this but I’m just giving you a realistic example. That is, if you KNOW your limits and live WITHIN those limits. And visiting the websites that I recommended above will help you understand the science behind all this and get you started on the right path. I promise you will be sooo happy that you did this. This is what I call, good saving habits!!! Financial savings on AUTOPILOT.
Another thing I strongly recommend, is to make sure that you’re emergency savings account is *NOT LINKED WITHIN THE SAME BANK AS YOUR CHECKING ACCOUNT*. I cannot stress this enough. This means that, your emergency savings account should NOT be setup through the SAME bank as your checking account. It should be setup through a completely DIFFERENT BANK. Allow me to explain why…
When I discovered this automatic savings plan, I started out with a regular checking account through CapitalOne360, and setup an emergency savings account alongside it. Through tons of research, I vowed to give CapitalOne360 a try after having a horrific experience with “Spank of America” (Bank of America); and my experience with CapitalOne has been nothing shy of amazing. So again, I setup a checking account and an emergency savings account all in one bundle. Remember what I just stated above about how you shouldn’t even “think” about your emergency savings account? Well, what happens is that when you have these two accounts within the same bank, you’ll be ALOT more inclined and urged to transfer funds back and fourth. Especially if you login using the mobile APP because it’s such a quick and convenient process. Both accounts are there and visible at your leisure. Banks have made it very easy by providing it’s clients with an app that makes it very simple to “transfer funds” in an instant from one account to another. Juggling money has never been this easy. In my opinion, this makes it very hard for people to stick with a financial savings plan; as it causes them to lose discipline. Check out these two screenshots below of the CapitalOne360 app I have setup on my smartphone, showing you how quick and easy it is to transfer funds.
With the convenience of this feature, it makes it 10x harder for your to keep from leaving your emergency savings account the hell alone. So what is the answer to this dilemma???
Simply setup a regular savings account within the same bank as your checking account, and setup your EMERGENCY savings account, with a completely different bank.
So here’s the breakdown of my own accounts…..
With CapitalOne360, I have an initial checking account, and an initial savings account. My initial checking account is what I use for the majority of my bills and every day purchases such as food, gas, and whatnot. My initial savings account, is just a regular savings account in which I transfer a lower % of money into every week from my weekly income. This is more of a “short term” savings account that I sometimes dip into if the right situation calls for it.
Now my Ally Bank account on the other hand, is my emergency savings account that I have set to automatically transfer a larger percentage of my income from my CapitalOne Checking Account, (from direct deposit/other sources of income), straight directly to my emergency savings account every week. Whatever is left from that, is what I use for my bills and every day purchases like I mentioned above. And even then, I still strive to live as frugal as possible and know my financial limits. I also use financial tools like the ones I posted above to help with managing my expenses. This emergency savings account is my “long term” savings account that I have setup for myself as funds to support my future travels, and any emergencies I might run into along the journey. Having all of this setup on autopilot enables me to know that at the end of every month, not only am I on-time with bills, but I have also invested in myself by ensuring a proper financial backup plan. Which is a very comfortable, worry-less and liberating experience.
Hopefully this post gave you some insight on why saving money is extremely important and why you should start now! Of course, the bank accounts I recommended above may not fit your standards, but no worries because this advice applies to any bank. I am very sure that I’ll elaborate more on this in future posts. But in the meantime, if you have any questions feel free to shoot me a message via comment or email. Thanks for reading!
“Money can’t buy happiness, but it’s for damn sure more comfortable to cry in a Mercedes than on a bicycle.”