Living beyond your means is when you spend too much money for what you make. You probably feel rich now that you aren’t working those hourly wage jobs from high school and college, but it’s important to remember that living within your means is essential if you want to ensure a healthy financial future.
Now that you have a larger income, start saving! You never know when an emergency could come about. An emergency fund will help you prepare for life’s unpleasant financial surprises. This savings fund can help you pay for car repairs, or help you take care of other issues that might pop up. A large enough emergency fund can serve as a safety. You could get laid off from your job or have unexpected medical bills to pay. While it may not provide complete protection, an emergency fund can provide some relief by helping you avoid financial debt. Do you have enough money saved to get you through an unexpected financial situation? If the answer is no, then you are not living within your means. Experts say that you should save three to six months of expenses in order to protect yourself. This gives you back up for a few months in case you need to look for a job, get caught up on bills or deal with any unexpected life event that might cause financial stress.
Where do I start?
Starting a savings account can be hard at first! It takes time! Consider setting up an automatic transfer from your checking to your savings account. You can have the same amount transferred into your savings on a weekly, bi-weekly, monthly or other regular basis so you save money without having to think about it. In the event of unemployment, a major medical emergency or another unexpected expense, you’ll be prepared. Ideally you should be saving 10% of your paycheck. If that is too much, consider 5% now and as you get older and make more money, you can increase that percentage.
Just remember to be smart with your money and live within your means! For help with budgeting and other areas of personal finance feel free to email me or ask someone from your credit union! For quick access, check out this great website to keep your finances on track, www.mint.com. You will be saving money in no time!