I’ve had many, many sleepless nights worrying about money. And I’ve come to realize that I NEED to have that security blanket of having money in the bank for the unexpected. If you’re feeling the same way, you are not alone.
It’s a shared experience, as 37% of Americans would struggle to cover a $400 emergency, and 70-80% of us report feeling stressed about money. You’re not alone in this.
Here’s the silver lining…having a cash cushion between you and life significantly reduces the stress of unexpected expenses. It’s a beacon of hope in the financial storm.
Ideally, you have 3-6 months of living expenses set aside. If your income is variable, you should aim for 6-12 months.
But if you have no emergency savings, making three months of living costs your savings goal is beyond fantastic. It will be a significant step forward in financial security, and now we know there’s a good chance it may also help you manage your financial stress.
If you think this is not something you can work on, I will ask you for a moment of self-care and kindness. Can you turn around your thinking and appreciate how you can’t afford to make emergency savings a priority? It is not just about the financial security it will bring but the priceless peace of mind you deserve.
And don’t let the bigger long-term goal of having one year of expenses set aside in a safe savings account overwhelm you. That’s not your goal for now. Let’s take it one step at a time.
The first step in committing to building up a 3-month savings account is to have a clear picture of your monthly essential costs. There is no guessing or ballparking. Please find some quiet time to tally up not just the rent/mortgage but also the food and utilities. Then, calculate the monthly cost of all your essential insurance premiums: health, home/renters, and car.
Then multiply that by 3. That’s your savings goal.
Next, divide that sum by 12. For instance, if three months of living costs is $7,500, you would need to save $625 a month to have your 3-month emergency savings within one year. If that’s too steep a commitment, divide by 18 to see what you need to save to meet your goal within a year and a half. Still too steep? No worries! Divided by 24, could you save that sum to reach your goal within two years? For our $7,500 example, that would be $310.50 a month, about $10 a day. That’s not out of the question if you prioritize it.
Once you decide how much you are going to save, I want you to commit to an automatic deposit into a high-yield savings account. The monthly (biweekly or weekly) transfer should be free to move money from a current account into your new savings account.
The final step is to log in to your new savings account and review it once a month. Then, give yourself credit for what you have already achieved: your account grows monthly, building financial security. And that’s going to help make life less stressful.
Cheers to a good night’s sleep!
