Once you have freed up all that extra money from paying off your debt you need to begin saving aggressively. There will be a point when the money you have will earn more than you do in a month. This takes quite a bit of money, and in order for this to happen you need put a large amount away each month. Once you have a six month emergency fundsaved, you will need to begin investing your money. This how you can grow your wealththe most effectively. Additionally saving money can help you be prepared to handle the ups and downs that will happen throughout your life.
Saving for an emergency fund may be the first step, but you will begin to really build wealth when you invest. Think beyond savings for retirement and find a good financial planner to help you save and invest your money.
Different people save for different reasons. You can start by saving ten percent of your income each month. Here are seven reasons that you may consider saving your money.
It is important to have an emergency fundset aside to cover unexpected expenses. This could cover an unexpected car repair, your emergency appendectomy or a sudden job loss. Ideally your emergency fund should be about three to six months of your expenses. If you are just starting out you should put aside at least $1000.00 for this. In addition to your emergency fund you need to make sure you have a plan and good insurance in place to help you survive theunexpected financial events in your life.
Another important reason to save money is your retirement. The sooner you start saving for retirement, the less you will have to save in the future. You can put your money to work for you. As you continue to contribute overtime you will be earning more interest on the money you have, then you put in each month. You should at least be contributing up to your employer’s match and eventually you will want to contribute ten to fifteen percent of your gross income.
A third reason to save money is for a down payment on a house. Your negotiating power goes a lot farther when you have a significant down payment towards your home. You will receive better interest rates, and be able to afford a bigger home. You can determine how much you save towards this each month depending on your circumstances.
A fourth reason to save money is to have fun. You can save up for your tour of Europe or that Caribbean cruise. Additionally you can be saving for fun large ticket items such as a Playstation 3 or a new boat. Your negotiating power is stronger if you have cash in hand on bigger purchases. Plus you do not want to be paying off your trip to Europe in five years. Even if you save up for your vacation, you should try save on your vacation expenses. More »
A fifth reason is to purchase a car with cash. You will be amazed at how much money you can free up in your budget if you do not always have a car payment. You can also negotiate the price of the car much lower if you are willing to pay cash at the dealership.
A sixth reason is to set up your sinking funds. A sinking fund is money you set aside for future repairs or improvements on your car, home or other possessions. This planning can help you to stop dipping into your emergency fund every time you need to fix your car.
A seventh reason to begin saving money is for your future education. Each year more people return to school to earn their masters or doctorate degrees. You may also consider saving for your child’s education when the time comes.