Digging Your Well Early
A colleague of mine used to talk about digging a well early in terms of our business owner clients having the financial resources available to withstand fluctuations in their firm’s operating results or working capital resources (cash). It is a lot easier for these businesses to build cash reserves and obtain lines of credit from their bank when business is good, so they are more likely to survive through the eventual economic down cycle.
This concept applies to individuals and families too. As a general rule of thumb, you should have 6 months or so of household expenses available as a “rainy day” fund. This will help get you through most unexpected expenses (the car just dropped the transmission) or hits to household income (you or your spouse’s employer went through a round of layoffs and it may take several months to find an equivalent position). Go through the last several months expenses and add up all the necessities; rent/mortgage payments, utilities, food, tuition, etc). Throw out any one time or isolated items (like Christmas shopping). Find the average and multiply by 6 (or more if you are conservative).
If you don’t already have your emergency fund squirreled away, start now. Automatic payroll deposits into a separate bank account work well. And don’t put the emergency account on an ATM card. This will take away the instant access factor and perhaps slow you down just enough before you tap the account for that really cool pair of shoes.
Although I do not like borrowing for short term expenses, this may be your only option for a true emergency in the near term until you can build up your savings. Again, keep the emergency card separate from your wallet, in a safe place.
Spending less than you make each month seems logical enough, but in general, we have not been a nation of great savers. Digging a well before the dry season makes life a lot easier in the long run.
This concept applies to individuals and families too. As a general rule of thumb, you should have 6 months or so of household expenses available as a “rainy day” fund. This will help get you through most unexpected expenses (the car just dropped the transmission) or hits to household income (you or your spouse’s employer went through a round of layoffs and it may take several months to find an equivalent position). Go through the last several months expenses and add up all the necessities; rent/mortgage payments, utilities, food, tuition, etc). Throw out any one time or isolated items (like Christmas shopping). Find the average and multiply by 6 (or more if you are conservative).
If you don’t already have your emergency fund squirreled away, start now. Automatic payroll deposits into a separate bank account work well. And don’t put the emergency account on an ATM card. This will take away the instant access factor and perhaps slow you down just enough before you tap the account for that really cool pair of shoes.
Although I do not like borrowing for short term expenses, this may be your only option for a true emergency in the near term until you can build up your savings. Again, keep the emergency card separate from your wallet, in a safe place.
Spending less than you make each month seems logical enough, but in general, we have not been a nation of great savers. Digging a well before the dry season makes life a lot easier in the long run.
Try any of these savings tips from the AICPA. In most of these cases, you are simply trading convenience for cash, but they can add up to a significant difference in your annual spending.
• Make a Budget and sick to it, review how you did at the end of each month
• Cook dinner at home
• Bring leftovers for lunch
• Use coupons
• Purchase generic or store brands
• Buy food in bulk, and break packages down for several meals (but don’t get sucked in to buying items you don’t need at Sam’s Club because everything seems like a bargain –STICK TO YOUR LIST
• Drink tap water or use re-usable bottles with filtered water
• Limit take-out Meals
For more money saving ideas, go to www.feedthepig.org
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• Make a Budget and sick to it, review how you did at the end of each month
• Cook dinner at home
• Bring leftovers for lunch
• Use coupons
• Purchase generic or store brands
• Buy food in bulk, and break packages down for several meals (but don’t get sucked in to buying items you don’t need at Sam’s Club because everything seems like a bargain –STICK TO YOUR LIST
• Drink tap water or use re-usable bottles with filtered water
• Limit take-out Meals
For more money saving ideas, go to www.feedthepig.org
Return to News Home