Tuesday, August 19, 2008

Give Your Savings Account a Raise

Photo by mag3737

When working on building substantial savings, many people agree that you should put away a percentage of your earned income.
Personally, I am currently putting 5% of my paycheck away to help meet my savings goals. I am working at building my Emergency Fund first, and then I have a list of other things that I am saving for.
I am about to get a raise at my regular job and with that, I will also be giving my savings account a raise. Not only will I be depositing more because it will be 5% of a bigger number, but I'll also be raising it to 6% and intend to do so every time I get a raise up to a maximum of 10% for now.

Why is this Important?

When you receive a raise, you are getting above the money that you currently have budgeted. It's easy to increase the amount of money that you are saving because even with that added percentage, it is likely that you'll still have a higher disposable income. It won't impact your every day life to put more money away, but it will build your savings much more quickly.
A 1% raise in my what I deposit into my account along with having a higher amount anyway due to my income being increased knocks 47 weeks off how long it will take to hit my Emergency Fund goal, assuming I put no money other than that into my savings.

What Will I Do When I Hit My Goal?

Essentially, when I hit one saving goal I will move on to the next in a Snowball fashion, and there will be more coming on that at a later date. Having reachable goals is an important psychological motivator, which is why I track what percentage of my goal all of my Savings accounts are currently at. I adjust this every time money goes in and it makes me feel as though I'm getting somewhere, even if all I have added is a tenth of a per cent.

Even though I don't save as much money as I would like and I do still have a lot of debt, working on my emergency fund helps me to increase my financial comfort level greatly. I feel like I am securing my future and when bad things happen I am much more prepared.

1 comment:

Another Personal Finance Blog said...

This is great advice that I try to follow. Just because you have more money doesn't mean you should spend more.