You need to start saving now !!!!!
As I was researching for this post, I got into a rabbit hole reading about payday loans. I did not think these were legal in the United States. We have the system of chimbadzo in Zimbabwe (very high interest -short term loans- APR over 30%). It turns out in the U.S. similar loans are legal, and they are a money pit. For example, if you are in a bind and borrow $100, they will want between $100 and $130 in a week the interest will double each week you are unable to pay. One guy borrowed $2400 in a few months he owed $4000. It is crazy!
What struck is me is that we often assume that people needing these loans are the working poor, low financial literacy, irresponsible, etc. but that is not necessarily true. I read a lot of horror stories on reddit. Reddit is like the craigslist of knowledge for savvy millennials. It was, after all, founded by Serena William’s husband. If educated people with somewhat stable jobs are struggling financially to the extent of needing these predatory loans, it means the working class, the poor and honestly all of us are at risk of ending up in these money pits.
Money is an uncomfortable subject, and yet it is so important. I finally submitted the revisions to my article on money in politics – even politicians do not want to talk about how much they are spending to get elected. It is an uncomfortable subject- I get it. Dear friend, let us find ways to plan so that we can be prepared for the various challenges ahead.
Saving is a lifestyle habit that should start very early on. However, it is never too late to learn new tricks. You’ve got this!
I am going to discuss some strategies that I have learned or read about to get me on the path to saving.
Whatever stage you are in life, you need a healthy savings account. I know the thought of saving can be scary. Everyone, IS talking about a 6-month emergency saving when you are just trying to have $150 saved. SCARY! Baby steps!
Stage 0: No savings account
- Start very small. Challenge yourself to set aside just $20 a month for three months then double that to $40. As an undergrad, I saved $50-$100 from my small paycheck every month. By the time graduation came, I had enough saved to invite family to my graduation and cover three months of rent ($500/month) in DC for my unpaid internship.
- Open a high yield savings account
- These accounts will give you at least 2% interest. In South Africa, these accounts would give you about 7% interest but no point getting jealous hahaha. If you are in SA, please tell me you have taken advantage of these generous rates. 2-3% is quite common in most developed countries. Banks are stingy- it irks me that they will charge you 14% for a loan and give 0% for your savings.
- Which ones- I hate to endorse any products, but I can say look for accounts that do not require a minimum balance even a $100 minimum balance. No Fees! Banks are already making money from your money – they do not need to charge you a fee for this. I am looking at you Bank of America. I use American Express but I am pretty sure there are better options online these days.
- Direct deposit: The best way to save is to do it when you still have money
- You can ask HR to split your paycheck into multiple payments to your checking and savings. You can tell them how much to put in each account. Nearly every HR department will do this.
- Solo Set up auto savings from your checking to savings – as I mentioned before I used to transfer $27 each week from my checking to savings. This is my fun money now. It also saved me this month because I forgot that faculty housing you pay rent at the end of the month not in advance like most rental situations. I had a rude awakening- thanks to this fun fund we did not have to deep into a savings account.
- Essential steps towards financial health that I think about
- Create a budget and stick to it
- Write down your financial goals -even lofty ones
- Save at least $1,000 for an emergency fund
- Pay off debt (ALL DEBT-) except your mortgage –