With that being said, I also believe it's important to have additional savings outside of a 401k. It's recommended to have 3-6 months of living expenses in an easy-to-access savings account as an emergency fund. Calculating this value is a great exercise because it forces you to look at your required costs vs extra costs (a great place to start formulating a budget...). Set this emergency fund as a goal and really do what you need to in order to build it quickly. So what if it means drinking water instead of soda at lunch? Or ordering frugally at happy hour? Or skipping the extra trips to Starbucks? You will survive, I promise. Establishing this fund ensures that you can live if anything happens to your current income flow and should be a priority. Oh, and once you've accomplished this? LEAVE IT ALONE. Don't dip into it next time Lilly or Nordstrom has a sale- you'll regret it if you ever happen to need this fund.
On top of an emergency fund, you may want to set an additional savings goal depending on where you are in your life. Do you want to purchase a new car or your own place? You'll need a down payment. How about replacing your hand-me-down furniture? That's not cheap. Are you going to be financially responsible for your wedding? You might want to start getting some extra cash set aside. Regardless of your goal, this is a great way to keep adding to your savings. Take a look at what you'd like to save and how long before you want to do so. This will allow you to break down what you need to save every month. I am currently allowing myself more flexibility here than I did with my emergency fund, but I do my best to keep track of extra spending so I can make up my shortcomings the next few months. I do this so my end goal isn't disrupted. This girl is hoping to buy when I move next, so I have a ton of saving to do!
As I mentioned before, bugeting is a great idea when you're first starting out. Getting paychecks larger than you've ever gotten before can trick you into thinking you can spend freely. Now, sometimes that is true (please refer me to your company if you have this kind of job) but more often it's an illusion. Required spends tend to increase when you're getting a full-time paycheck and need to be taken care of first before spending for fun. You should use some sort of visualization (I used Excel) to identify all of your earnings and spendings each month. I recommend splitting into sections with income, required spends (rent, car, gas, heating, power, etc.), and optional spends (eating out, concerts, shopping, etc.). This helps you to identify areas that you can have more flexibility in vs. those that are consistently there month to month. If you'd like more information on how I set up my budget, please send me an email and I'd be happy to go into more detail with you!
I hope you find my experiences useful and are able to start saving ASAP if you aren't already!
How are you saving? Do you have a savings goal? How do you prioritize your savings efforts?
Thanks for all of this advice! I can relate. I'm cutting back on things little by little to build up my emergency fund (buying coffee only 2x a week, packing lunch instead of eating out, etc). I'm not too organized with budgeting because I'm not paying for rent or major expenses besides public transit, but I know how important it is. You should make an excel template to go along with this post - I think it would be really useful!
ReplyDeleteAlessandra | blog.pumpup.com
Definitely a worthwhile read. Saving money can be so hard...especially in your twenties when you're young and free...and definitely not making as much as other people in your profession. But cutting back here and there definitely helps. For us, eating out less is our biggest money saver!
ReplyDeleteGreat post! I have such a hard time now, and it will be so much more important when I get out of college! i've found it's the little things that help
ReplyDeleteCourtney//As We Stumble Along
I definitely try to dump most of my paychecks into my savings account and not touch it unless I have to. I definitely need to set up an additional emergency fund that I NEVER touch very soon.
ReplyDeleteThanks for all the handy tips.
xoxo, Jenny || Breakfast at Lillys
Such great advice! I'm so bad at spending so much! It really is difficult!
ReplyDeletewww.kayleighskloset.com
I really enjoyed this - you make it seem super doable! I have a hard time saving money and am dreading the day I graduate and have to start saving money for "grown-up" things!
ReplyDeletehttp://www.thepdxbelle.com/
I am so bad with money and I am desperately trying to improve. Thanks for writing this post, it was really well written and definitely inspires me to work at saving.
ReplyDeleteThank goodness for you and this post, I needed this!
ReplyDeleteThese are all great tips! taking advantage of a 401k is gold. Like you said, free money baby!! I was never much of a saver but I recently opened a savings with ally.com and it blows my mind how much interest I've accrued in such little time. I don't work for them or anything, I'm just thoroughly impressed. I'm sure there are a lot of great banks out there with some awesome rates. I can just kick myself for not saving sooner!
ReplyDeleteThese are such great tips! I agree with the 401K! I'm going to use some of your tips of my monthly goal of better budgeting.
ReplyDeleteI'm trying to save so much right now while living at home during my last year of graduate school because then I can slowly start paying off my loans and move to Chicago after graduation.
ReplyDeleteThese tips are so helpful! I really need to start saving for when I graduate college!
ReplyDeleteSuch great tips and I will definitely try these to save more money!!
ReplyDeleteThanks for this! I have a really hard time saving and putting money away. I'm a freelancer and a blogger so all of my money is not consistent! I could make $500 one month and $50 the next. However, I have a puppy and I need to take care of her. Luckily, my girlfriend and I split most costs so it makes it a lot easier. But I definitely need to start taking advantage of my savings account!
ReplyDeleteUm...this is a KILLER post because I have absolutely no idea how to save money...
ReplyDeleteLauren
The Fashionista's Diary
This is an AMAZING post! I'm so thankful that my boyfriend works in finance and pushed me to start saving, otherwise, I probably wouldn't have started saving until it was too late. One of the selling points about my current job was that there's a pension!
ReplyDeleteXX, SS || A Little Seersucker Sass
It's my favorite thing to do each month! I love setting aside money to savings, because I know that's an adult thing to do even if it's not fun!
ReplyDeleteNicole // Chronicling Home
All of these tips are GREAT advice for anyone! My husband and I have always lived below our means, and it's definitely helped us stay out of trouble. Like you said, a big paycheck can make you feel like you're doing ok, but it won't help you prepare for future troubles or future needs unless you save it correctly! LOVE this post!
ReplyDeletexoxo Ashley Brooke
The 3 to 6 month rule is really important! I have been in a situation where that could have made a difference and have changed the way I approach saving...great tips
ReplyDelete