Once you’ve gotten into the habit of setting up your budget every month and living within you means, the next step is to get into the habit of saving some of your money every month.
Just like the government takes a (big, huge, bold) chunk out of every dollar you make, you need to be doing the same for yourself! Most financial gurus say “pay yourself first.” The problem is, you really may not be able to do that unless you already make far more than you spend, or you have a variable salary.
If you have a variable salary, you can simply work more, and make more. But most people have a fixed income with, perhaps, a little bit of overtime here and there. Therefore, if you truly pay yourself first, there might be several bills you can’t pay at all. This will lead to added stress when these companies start calling you, looking for their money. And it can lead to late fees, re-installation fees, and other nonsense.
A better plan, in my opinion, is to pay yourself REGULARLY, not necessarily first. What this means is that every paycheck has to have something set aside for YOU. I don’t care if it’s ten dollars, or one dollar, or the change in your purse. Some of every dollar you make belongs to you, and you alone. If need be, put it in a jar, and put the jar way up on a closet shelf.
The point is to make it a habit. Make sure it’s an every-month thing. Once you’ve gotten a handle on your budget, and you know how much you can save every month, try to automate it. Most banks allow you to do automatic transfers into savings. That way, you won’t be able to talk yourself out of it. But make sure you’re doing your budget every month. That way you won’t overspend, and your savings will grow little by little over the months and years.
The reason why this is important, is that cash gives you options. When you have cash set aside, you can use it for absolutely anything. You can pay off debt; you can pay for unexpected expenses; you can put it towards those expenses you forget about, like car registration; you can help out a friend. This is what makes putting cash aside different from investing or paying down debt.
When you invest, or pay down debt, you grow your net worth in a powerful way. This is great – and essential! But nothing is better than cash. Investments can go down in value. And paying off debt is powerful, but once you pay out that money, it’s gone. Savings, on the other hand, can be used anytime, anywhere.
So, while you’re developing your basic financial plan, don’t forget about cash. Paying for things like groceries and gas in cash can help you with discipline. If you take $50.00 in cash with you to the grocery store, for example, you have to make sure the total comes in at under $50.00 – unless you want to be embarrassed! It forces you to think, and be careful, and not burn through your money like ice on a hot stove.
Having cash at home in an envelope (no need to carry it all around with you all the time!) is also great in case of an emergency. What if there’s an earthquake, or a heavy storm, and electricity is down? No problem. You have a small stash. You’re fine.
Having cash can make you feel a little more wealthy. That feeling is good for you! Feeling wealthy will make you behave like a wealthy person, carry yourself with more confidence, and attract even more money. It also allows you to be generous, which attracts wealth like a magnet.
So, give cash a try! It’s not old-fashioned or out of date. It gives you options and it gives you power.
Have a wealthy week!