If you live from paycheck to paycheck, even the simplest things, such as an unexpected bill, might cause you trouble. Make your next goal to become financially prepared for the ‘what if’!
Usually, finance specialists suggest having up to 6 months of monthly salaries in your bank account, especially if you are on low income. Knowing that you will be fine if something unexpected happens provides a comforting feeling of safety and allows to concentrate on other, more pleasant areas in life.
I fully understand, that saving 3 monthly salaries might be a difficult task to achieve. Taking one step at a time is my go-to approach, when it comes to finances, and generally, in life. The easiest way to save is by building a budget. Then, you will be able to clearly see your financial situation, your weaknesses and what you can improve. To get a great overview about my finances I included personal finance management tools like Zuper into my daily life. It helps me to get more control and feel less stressed out.
After you evaluate your income and expenses, you can start saving. Dedicate a certain amount of your salary to a saving fund until you save the amount equal to your 3 net monthly salaries.
This is why budgeting is extremely important – it allows you to see how much of your month’s salary is dedicated to the essentials – food, household and how much is left after you pay all the bills. The general rule of thumb, I’d say, should be dedicating about 20 percent of your monthly salary to your savings. It can be tough at times, but once you’ve saved the necessary amount, you will feel great and much more at ease with your finances.
If it still seems too extreme, you can adjust the monthly amount according to your situation. Save 1 percent of your monthly salary, if it’s all you can do – saving something is much better than not saving at all. And vice versa – if you see that you can do more, definitely commit to increasing the monthly saving percent.
The first thing you should do is open a savings account, to which you will be transferring the chosen percentage of your salary each month. If possible, create automatic money transfers to be completed each month after you receive your paycheck. Once you take the first step, the rest will follow.
Financial troubles fall among the most stressful situations in life. Even though you cannot prevent yourself from experiencing problems, you can create a solid financial shield. Saving is a good way to ensure financial stability, allowing to react calmly in unexpected situations.
To sum up, if you want to finally break the cycle of living from paycheck to paycheck, create yourself a financial buffer by saving at least 3 monthly salaries in your bank account.