The economy continues to be brutal. I don’t need to tell you. You know; your neighbor knows; your co-workers know. Our state and national leaders reassure us that the worst is behind us (and I actually agree based on the economic data I analyze and follow), but the reality of daily life remains extremely difficult for many people. So, how can we improve our lives today, and protect ourselves from ever having this happen to us again? We can’t control macro-realities like global trade and economic downturns, but we certainly can control our own preparedness for such events. A few simple steps can make a huge difference. In this series of articles, I will lay out several steps that the average American can take to build a financial fortress that can fend off even the most vicious economic downturns.
The first and most important step to take, starting immediately (no matter how in debt you may be) is to start saving. “But Jesse, I can’t make my bills now. How can I save anything?” you ask. Well, the key word is start. You don’t have to be a world-class saver; you just need to begin. Start setting aside something. Don’t beat yourself up if that something is small. I recommend opening an online account at a bank like INGdirect or Aly. Internet banking has a couple of big benefits. My favorite part of saving online is that it is slightly harder to get to your money. Because a request for funds takes a couple of days, you are much less likely to take money out on a whim. Many of these accounts also pay a decent interest rate (for saving) and some (like ING) offer a sign up bonus of up to $50. See, you’re already off and running. Once you have opened an account, just start saving, whatever you can. If all you can afford is $10 per month, then save that. It’s a start, and it will grow with time.
America is turning the corner as far as saving goes. A few short years ago, the average American family saved less than 1% of their annual income. Then the economy crashed, and Americans (bruised by being overextended) started changing their ways. At the time of this writing, the average American family is now saving 6% of the annual income. This is a huge and important difference. This means that, going forward, the average American family will have the ability to pay bills even when the unexpected happens. If something bad happens (like an unexpected job loss) the average family will be better prepared to survive. They will no longer be living on the edge of financial ruin, perched on the edge of an unstable house of cards. As a family, or as an individual, you must have a savings. It is the first weapon in your financial fortress. Begin today, and keep saving until you have at least three months worth of living expenses saved up and set aside. If you really want to be safe, shoot for six.
Your savings will help protect you going forward. We will discuss the next barrier in your financial fortress in the next article.