Spending each paycheck as if it’s the paycheck you’ll get for the rest of your life is a mistake — you don’t know what will happen in the future. With every paycheck, set aside money to “pay yourself’. Start saving as much as you can until it’s uncomfortable.
Why should you be uncomfortable now? Especially when you don’t even make enough to live the life you want to lead now? Why should you allocate any money toward savings especially since retirement is years away?
Thinking about retirement might be totally insane especially since you’re just getting started in your career. No it’s not as much fun to save as it is to spend. But you’ll love knowing you’re taken care of in the future. Freedom is having a rainy day fund will keep you from falling into debt if you lose your job, have a medical emergency or have some type of unexpected payment to make.
Put thought in now to take care of your future self. How do you know what direction to head if you don’t know where you’re going? Give your future self a financially free future by making savings goal and practicing good spending habits now.
BUCKET OUT YOUR SAVINGS
Bucket out your savings for different time horizons to start stashing away what you earn.
Emergency Fund. First you want to save up to have a rainy day emergency fund worth equivalently three to six months of expenses. That way if something happens like you get laid off or you have to get emergency surgery, you’ll be able to pay those expenses out of pocket without going into debt. Once you get your safety umbrella of three to six months, it’s time to start thinking about the future.
Retirement. Retirement may seem like hundreds of years away – after all, you just got started with your career. However, the biggest asset you have right now is time. Give your money time to make money. If you start early and are diligent about adding to your savings, you’ll see incredible returns in your lifetime.
Travel and fun. Stock away money for the things you want to do. If you’ve always dreamed of going to Europe, start saving money now to see your future come to fruition. Even just saving to be able to go out to dinner with your girlfriends is a smart way to think about this bucket. No longer will money be a barrier to live the fun life you want because you’re saving up for the fun life experiences.