Protect Yourself and Start Saving, Now!
The other major key to staying ahead in your finances is saving. You need savings to keep you from sliding back into debt.
Think about it: you’re moving along, paying off your credit cards and making terrific progress. And your cat gets a nasty double ear infection. Between trips to the vet and expensive medications, this ends up costing you close to $200. Where is that money going to come from?
Unless you a reasonable amount of savings, you are probably going to put it on your credit card. Although you now know enough to put it on your lowest rate credit card, that purchase is going to set you back and impede your progress and it’s going to make you feel rotten. That’s why you need savings.
Turn Protection into Profit
- As you start to pay off your debts, siphon off a chunk of money each month—3–5% is a good start but aim for 10%—and put it into a higher interest savings account.
- Find the highest paying money market account you can find—until you’ve got a substantial emergency cushion equivalent to 3 to 6 months salary. That’s your protection. If you get retrenched, if the dog gets ill, if your transmission dies, you’ll be able to live and pay your bills without sliding back.
- Once you’ve got your emergency cushion, you can start investing that money in a portfolio of shares and mutual funds that can help you build a real foundation of wealth for your future.
