Having no savings is easily one of the biggest scares for anyone. No matter how broke you are, the bills have to be paid, the food needs to be on the table and you have to have hot water for the cold winter days. The fact is that you need money for everything that can make your life easy and comfortable, and savings are a must if you wish to have yourself and your family protected against an unanticipated financial hardship. And if you don’t have the basic financial cushion lying in your savings account, it’s a big sign that you need to take some money makeover steps.
The importance of saving money can’t be stressed enough upon. Your savings are what you need during the difficult times like an unexpected job loss or a pay cut, a medical emergency or a sudden house repair. Moreover, savings are important to finance your long term financial goals – retirement, debt payoff and children’s education.
I’m pretty sure you must have committed some major financial mistakes in your life. We all have. And that’s exactly why we are here discussing the importance of savings. To build your savings from zero might sound like an intimidating task and it certainly won’t be a short journey. But the good part is that it’s never too late to start saving money, given that you have the right intention and discipline to do the work it takes.
Here are a few money steps that you can take right away to save for all your financial goals:
1. Acknowledge And Accept Your Financial Situation – Accepting and acknowledging the fact that you aren’t in a great financial position is the first step to finding a solution to it. It will help you ascertain how your life has been affected by it and how badly you need to improve your situation.
How to describe your financial situation?:
- Are you struggling to meet your basic financial needs like food, utility and rent?
- Are you prepared to deal with a sudden financial setback?
- What’s the value of your assets and the liabilities?
- While it’s good to be optimistic about the future, it’s in your best interest to be realistic about the present if you want to set off on a journey towards financial success.
2. Have A Close Look At Your Lifestyle – The second step towards improving your financial situation is to assess your lifestyle in order to know where your money went. Maybe you have been hanging out with your friends at expensive places or spending heftily on vacations and branded clothes & accessories. Ask yourself if you have been eating out too much or giving away expensive gifts to friends and family.
While it’s totally human to seek social validation, the quality of life that you are living can sometimes be disastrous for your finances and can leave you in a lot of debt to repay. Having a closer look at your lifestyle will help you identify the pain points and the expenses that you need to cut back on to start building your savings.
Alternatively, you may realize that you have been living an extremely frugal lifestyle but it’s your limited income that is posing to be a threat on your finances. If so is the case, consider starting a side hustle or switch to a better paying job to be able to save some money.
3. Create A Budget Now! – Having zero savings most probably means that there’s something wrong with how you have been managing your money. A budget will help you get a reality check of your spending habits besides helping you identify the areas where you can save money. If you haven’t been able to build yourself some savings, there are also chances that you aren’t earning enough to meet your needs. Whatever the case, budgeting might help you identify the pain point which can then push you towards creating a strategy to fight your financial problems.
How often should you review your budget? – As often as needed. You may need to review your budget if there has been a rise or a fall in your family income. Or when there’s a change in your overall financial goals. Ideally, you should be reviewing your budget at the end of every month to be able to plan your budget for the next month.
4. Start Building An Emergency Fund – Zero savings certainly mean that you aren’t financially prepared for the risks associated with life – a sudden job loss or pay cut, medical emergency or a sudden car/home repair. Given the uncertainly of the surroundings, you don’t want to live with the idea of having no financial cushion to protect you from a financial blow. Start building an emergency fund as soon as possible, targeting liquidity equal to at least three months of your household expenses.
5. Get Rid Of Debt As Quickly As Possible – One of the major reasons that people are often left with no savings is their huge debt repayment obligations. You might have been making a lot of money but the piling debt and the resulting interest amount eats up all your savings every month.
In order to get out of this cycle of being broke, make debt repayment your primary priority right now. Try building your life around this one goal until you are debt-free and in a position to save for your financial goals.
6. Save Like Crazy – Needless to say, savings should be your main mantra and goal of life if you wish you to get out of the cycle of being broke. Savings is the one-stop solution to all your financial problems and can help relieve a lot of stress that’s occupying your mind right now. Do everything in your power to save money – comparison shop every item, look for discount coupons, stop impulse buying, cut down on any unnecessary spending and automate your savings like it’s the sole purpose of your money.
It can surely seem overwhelming to cut down on the expenses that basically define your lifestyle but you will be happy to see the results in the form of increased savings. A few good changes in your spending habits can go a long way in helping you meet your money goals in the short-term as well as in the long-term.