Five steps to financial security

Five steps to financial security

Financial independence

It’s a fact that being in financial difficulty adversely affects how happy you are with everything else in life. Staying afloat financially can be tough. While feeling good about your finances may seem impossible, it is not that difficult if you just do it.

The strategy is simple: instead of one large savings account, you need to have at least three pools of financial resources to draw upon. Therefore, you will need to save money in three different ways. Remember, you are not trying to save a fortune, just enough to give you peace of mind.

  1. Jar in a closet: This is the oldest and yet the most effective method of saving money. Get one of those plastic 5 gallon water cooler jars and put it in your closet, out of sight but easy to reach. The small opening at the top of the jar makes it a little more difficult to raid every time you need a few bucks.  Whenever you get change in your pocket, put it in the jar. Take every opportunity to collect change during the day. When a clerk asks if you have correct change, say no. You can even go out of your way to ask for change for an extra dollar or so whenever you make a purchase, then put the change in the jar as soon as possible. The idea is to let the coins collect as long as possible. As the jar gets fuller your feeling of comfort and security will become greater every time you even think about it.
  2. Open an additional savings account: When you open the account make arrangements to have an affordable amount of money, whether its $10, $20 or more, automatically routed from your checking account to your additional account on the first of each month. Be sure to make note that the money will come out of your checking account on this date so you don’t have a bounced check. Don’t accept a checkbook or debit card for this account since you want to make it less tempting for you to dip into it for any little thing that crops up. Be aware that when you open the account the bank may require you to make an initial deposit of anywhere from $20 to $100. Also, don’t route more than you can afford into this additional account since that will be self defeating. Forget about this account and it will always be a source of comfort whenever you are thinking of the pools of resources that you can dip into should things suddenly go south.
  3. “Hidey hole” cash reserve: Everyone has something they can sell that would generate at least $100, or you can hold a garage or apartment sale. Convert the proceeds into $100 bills since this will make it less tempting to draw from every time you need few bucks. Put the bills in an envelope and hide it so well that only you can find it. Don’t weasel out on coming up with this money, everyone has something that will generate at least $100 in cash. Do it immediately, it’s a one-time event and the pain will be over quickly. This is your emergency stash that you can grab and run whenever absolutely necessary.
  4. Sacrifice a little: Now comes the time for a little pain, but only a little. Everyone has treats that they indulge in on a regular basis. For some, it’s a $5.00 beverage each morning from their favorite coffee house. For others, it may be a couple of nights out at a bar or dining at restaurants throughout the week. Most of us regularly spend money on more than one of these activities without giving it a thought. You don’t need a huge sacrifice here, just pick out one treat a week that you can live without. Calculate how much you spend on each week on this one treat. For example: a $5.00 beverage would add up to $25 per five-day workweek. Each morning place $5.00 in a special envelope and don’t buy that beverage for that day. If you choose to do without two or three soft drinks each day, add up the savings and put that in the envelope. Each Friday, for a very rewarding feeling, make a special trip through the drive through lane at the bank and deposit the money in your additional account. Continue to enjoy the other treats that you normally indulge in, just cut out this one. You can even sacrifice a different treat from week to week if you prefer.
  5. Stop wasting money: Any program to improve your financial situation must involve saving money. Review your checking account check register. Look hard at the checks you have written in the last three months. You will find items where you can save money. It may be magazine subscriptions, charges for checking or other unneeded services at your bank or paying for extra channels for cable television. Discontinue your landline telephone and rely on your cell phone. Check out books or magazines at the library instead of constantly buying them. Go through your bills for the last three months to see if there are other things you can live without. You may be paying too much for housing or computer games and software you could have done without. Every penny you save will add up so you can live better while adding to your resource pools.

When you have resource pools that you can dip into if necessary, you will have not only peace of mind, but a definite feeling of confidence and security!