to achieve. These include saving money for a down payment on a home, a child's college education, and retirement. They may also include paying off a car, student loans, or credit card debt. Developing a Spending Plan Time and effort are necessary to build a sustainable spending plan. Three easy steps are proposed below when developing your personal spending plan: 1.
Record - Keep a record of what you spend.
2.
Review - Analyze the information and decide what you do.
3.
Take action - Do something about what you have written down.
Importance of Saving Because no one can predict the future with certainty, we need to save money for anything that might happen. Here are some reasons why saving is important: •
Emergency Bolster - You should save money to avoid going to debt just to pay emergency situations, like unexpected medical expenses and damages caused by calamities or accidents.
•
Retirement - You will need savings/investments to take the place of income you will no longer receive when you retire.
•
Future Events - You need to save for future events like weddings, birthdays, anniversaries, and travels so as not to sacrifice your fixed expenses.
•
Instability of Social Security - Pensions from social security should only serve as supplementary and not the primary source of income after retirement.
•
A Little Goes a Long Way - Small consistent savings go a long way.
There are two ways to save: •
save before you spend; and
•
save after you spend wisely.
In order to stick to the savings habit, you should: 1. commit to a month; 2.
find an accountability partner;
3.
find a savings role model who is successful with his/her money, through tried and true savings;
4.
write your goal down and track it; and
5.
avoid tempting situations (don’t go
to the mall to “hang out"). CHAPTER 4 Financial Literacy
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