While most financial experts agree that saving should be a part of every household budget, many Americans admit that they aren’t prepared financially for life’s unexpected challenges and emergencies.
If your New Year’s resolution is to become more financially prepared for a “rainy day,” following are five tips to help you save. This is first article in a five-part financial planning series focused on Getting and Staying Prepared for Life’s Opportunities, Challenges and Milestones.
Tip #1 – Start saving now
There is no time like the present. Set specific savings goals and break them down to a set dollar amount to save each paycheck. Many experts recommend setting aside enough savings to cover at least six months of living expenses, but if that seems overwhelming, simply save as much as you can. The important thing is to start saving now, no matter how little. Vow to save at least a small portion of each paycheck and remain committed to saving, and then look for ways each month to increase the amount.
Tip #2 – Track your spending
One of the simplest ways to find money to put toward your rainy day fund is to keep a close eye on where your money is being spent. For two or three months, try keeping track of every expense, including small ones. Once you have a better idea of where your money is going, establish a budget that includes a spending and savings plan. Review your budget at the end of every month and determine if your spending was in line with your plan. If you spent less than planned, deposit the excess funds into your savings account. If you come up short, look for items to cut in your budget or ways to increase your income.
Tip #3- Make saving automatic
Treat your rainy day account like you’d treat any other financial obligation. If your goal is to save $5,000 this year, calculate the amount you’ll need to save from each paycheck, then arrange to have it automatically deposited into your savings account each time you get paid. Pay yourself first. Visit your bank branch and ask a banker if you can set up automatic transfers into your savings account, either directly from your paycheck or from your regular bank account.
Tip #4 – Go on a spending diet
Make a New Year’s resolution to try a spending diet. Avoid spending any money on non-essentials for 30 days and challenge yourself to save as much as you can to put toward your rainy day fund. Review your budget and identify extra or non-essential expenses, such as eating out, shopping, entertainment, etc., then make a list and vow not to spend on these items for one month. While you can’t opt out of eating or paying utility bills, you can try preparing inexpensive meals at home, taking shorter showers or turning down the thermostat. You might find that taking frugal to the extreme can be fun, even if only for a short period of time.
Tip #5 – Put your savings to work
Deposit your savings into an interest-bearing account that is easily accessible, such as a money market account. Money market accounts usually require higher minimum balance requirements than a regular savings account, but also pay higher interest. While there are limitations on the number of transactions per month, a money market account allows you to obtain cash when you need it and there are no penalties for withdrawing funds.
The foregoing article is intended to provide general information about saving for a rainy day and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor.
Matthew Beaudoin is a vice president and branch manager for Union Bank’s Hermosa Beach branch and a member of UB PROUD, the bank’s employee resource group for LGBTA employees and allies. Union Bank, N.A., provides an array of financial services to individuals, small businesses, middle-market companies, and major corporations. The bank operated 420 branches in California, Washington, Oregon, Texas, Illinois, New York and Georgia, as well as 2 international offices, on December 31, 2013. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations. In July 2013, American Banker Magazine and the Reputation Institute ranked Union Bank #1 for reputation among its customers. Visit www.unionbank.com for more information.
