10/05/2022
Savings are a key point to every financial plan. Check out 3 savings mistakes to avoid 👇👇👇👉
-Mistake 1: Thinking you don’t need a savings safety net because you’re young/single/no kids….
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If the past couple of years has shown us anything, it’s that LIFE HAPPENS WHEN YOU LEAST EXPECT IT! Are savings more important when you have small kids or a mortgage, etc? Yes. But does that mean savings can be thrown out the window when you aren’t at that stage yet?? NO! If you have expenses that you are responsible for, you need savings to cover them should something happen!
- Mistake 2: Not having a budget to know what you’re spending and using credit as your “safety net”………
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Budgets are annoying, cumbersome, and boring….but so are a lot of things that are super important! Step one of financial independence is knowing WHERE your money is going. A budget doesn’t have to be a set in stone spending limit; instead, it should be a roadmap for your expenses. When you’re going on a road trip, you don’t just jump in the car and drive, do you? You hook up the GPS - which gives you a roadmap and outline of your trip. What happens when there’s an unexpected change or roadblock? It reroutes! Your budget/spending work the same.
- Mistake 3: Investing all of your savings and not keeping any in the bank…..
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There has to be a balance between investing and saving. You should aim to keep a liquid safety net IN THE BANK of no less than 3 months worth of expenses, MINIMUM. Again, life happens. What happens if every dollar of your savings is invested and you need to pull money out when markets/holdings are down???? YOU LOSE MONEY! You’re realizing losses! Think about this example: it’s March 2020, and you have $10,000 saved up. Instead of keeping part of it in the bank, you invested it all. 3.5 weeks later, you lose your job. The market is down like crazy and suddenly your $10k is now worth $6k. You need that money to live on until you find another job, so you don’t have time to let the holding rebound, so you cash it out. You just took a $4k loss because you had no choice but to sell when the market was down because you didn’t have a safety net!
