The number one money saving rule is: pay yourself first.
Every time you receive money, whether that is a bi-weekly check from your employer, payment from a contract job, or any other income, put a portion of it into savings. Every time.
Even if you don’t feel you make enough money to be able to save, even if you are barely scraping by, even if you are not paying your monthly credit card bills, save a portion of your income. When it comes to saving, every penny really does count.
Pay Yourself First – Start Saving Money Now
If you’re not already, start saving now. Even if it is only 5% of your income, begin the habit of saving. Even if it is only 1% of your income, move the money into a savings account.
First, the habitual act of saving reinforces this good financial habit. Second, you need emergency savings. Finally, the money you save now will have more time to grow through the power of compound interest.
Emergency Savings
Emergencies are expensive and generally unavoidable. A major car repair, a trip to the emergency room, or last-minute travel expenses to attend a memorial service can cost hundreds, even thousands of dollars. Without emergency savings to cushion for such expenses, you could rack up debt that takes you months or years to pay off.
It is a good financial practice to have at least 3 to 6-months of living expenses in emergency savings.
The Power of Compound Interest
Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods that was added to the principal sum. It is essentially earning interest on interest.
The powers of compound interest means that the earlier you save money the more will accumulate. That is why is it critical to start saving now and to save every time you get paid.
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