Back to the original point. When I lived up in NJ, (over 60 years), there were more times than not having extra money to stash. Every time we had a little extra cash, something else changed. We were constantly on the black/red border in our checking account. States like NJ and others have some sort of radar that sees us when we get some money. Get a tiny raise? Insurance goes up. Get some money stashed for Christmas gifts, something else robs it away. It was rough. Cost of living raises are bs! They are never enough.
Yaz mentioned that a $500 emergency room visit is almost impossible because they don't have the cash. Now I know the point is to show the evil, I don't know any emergency room in NJ or even here in TN that would not take an emergency, especially a child and hold a fee over your head. But that's another story.
Over the years, my game plan was to stash a few bux away even if it meant $20 a week. The best thing you can do is be strict with your money. We always had at least a checking and savings account. We even had a Christmas Club no matter how small. (They even have those any more)? Then we also had the all so exciting, "Money Envelope"...
So why a savings account? They are useless. Ever hear someone say they can live off the interest in their savings account? A bs story that has been around forever. Go look at any interest gain even if you have 6 digit numbers in a savings account. Best be spent or invested elsewhere.
Back to a savings account. I call it an invisible wall. Today with online banking, you, for the most part, should never have to go to the bank. In my case, that would suck because the nearest bank is1.5 to 2 hrs away.
But what we have is all our money goes direct deposit into a checking account. We pay all our bills from it. Then we try move money to the savings account at the end of every month. Couple hundred or more. The 'invisible wall' has to be enforced by your good habits. Build that wall! lol. You should never try touch the money in the savings account. Its there for emergencies, maybe a vacation or a holiday. It can be done.
Yaz are right. We can buy expensive doo-dads, go out to eat, etc. But then complain we have no emergency money. No matter who you are, that is on you! IF you are so red/black borderline in your check book every month, things MUST change. Anything you can push into a savings account is a good thing. Deposit, enter it and don't keep looking at it. It grows fast.
Envelope store coming up.
For my short stint in real-estate, I had clients that thought they'd never be able to afford a house. They trusted me enough where I sat down and devised a 'budget' for them. Not this BS Quicken crap either. So here is what you do and it's worked each and every time I helped someone.
Devise a personal "48 week budget"..... your new budget year is no longer 52 weeks!
- Get yourself some graph paper or if you are good with spreadsheets, use your 'puter.
- Get out ALL your expenses. ALLLLLLLLL of them! Write each down on a separate line.
- Take annual totals and divide by 48 weeks. Sounds weird right? No... Not really. We need to see how much you pay a year for each item and none may be the same each month. Car insurance for instance came due over 9 months when I was in NJ... Today, semi or quarterly.
Add them up and divide as mentioned. The amount you come up with is how much money that is necessary each month by the end of 48 week year. Whether you have a particular bill due or not, you must put that amount in and not touch it. Again, you must be strict or this will not work.
Car Insurance is $1200 a year. You must put in $100 a month for it to be paid on time.
Grocery average.... $1200
Car gas, average pocket money, etc...
When all done, take your total family annual net income and divide it into a real year or 12 months. This will give you an idea what is left over each month after your bills will be paid.. Take that money and transfer it to savings. For the pocket money, you can either draw it from your atm or like we do, take cash back at grocery store of about $40-$60... We each take $20 for our pockets and the rest go into the notorious envelope. Date and upgrade totals on the envelope. Then stick it in the safe and never touch it unless needed.
The 48 week budget always works unless you are not making enough money to cover it. Then you better cut back on your bad habits. Hell, in NJ we use to get pizza or dine out once a week. There were times we could not even afford a pizza.
So why 48 weeks and not 52? Its a 'safe guard' I worked into the budget. Essentially, if this budget works for you, you end up with 4 weeks of free paychecks. That's where your free money comes from. You can push more money to savings, start and ira or whatever, but again, do not take it for granted.
Since I've created this, we've never been short, we can eat out without feeling guilty and we almost always push money to the savings account. It's not about the interest accrued. Its that 'invisible wall' that will help you keep your hands off! If you find you have quite a bit left over. Don't blow it. Add a couple hundred to your mortgage payment or start paying down your credit cards.
If you are good with a spreadsheet, put it all in there complete with the formulas to tabulate any numbers.
Good luck! Hope this helps some folks. If nothing else, try it on paper and see if it benefits you.