How long can your financial house sustain you? The Backup Savings Fund is not only the first step to the answer, it is a gateway to continued financial independence!
Also commonly known as an “Emergency Savings Account”, once fulfilled provides immediate stress alleviation. “Ahhh” That is a breath of air, weight lifting off your shoulders, and freedom of agility entering your life.
This is a staple of anyone beginning their financial planning. It all comes down to what your yearly expenses are. There are many resources that state having a balance that is at least 6 months of your expenses is a solid Emergency Fund. Having six months of expenses saved away is an accomplishment! However, in modern times, a minimum of a year is a more conservative and agile amount.
Aim high and as you store money away into this account, congratulate yourself! It is more than ok and acceptable to start with small amounts. Push yourself to increase that amount though each time. Don’t stress if it is hard to keep up with increasing savings rate amounts, consistency is key. Creating the habit of tucking money away followed by feelings of excitement and happiness is the ultimate goal system to align with.
The best motivation is money deposited in your account. This is one way of being a master of time rather than time being your master. As always, having a system that is fun to follow through on increases learning and results significantly. With tucking money away, whether, for bank savings funds or to fuel an investment portfolio, coloring charts make a large positive impact! This is not a joke, this is said with complete sincerity and joy.
Discussing the blessings of this financial asset, here are some FUNDamentals of a Backup Savings Account.
- Define your Backup Savings Number.
- Review the total amount of your yearly expenses.
- Decide the length of time your Backup Savings Fund will ideally cover.
- Such as 6 months = ½ of your yearly expenses. 1 year to cover = 100% of your yearly expenses. 2 years = Your expense total for 1 year times 2!
- Choose a number to start with, it doesn’t have to be perfect.
- As you change in life so will the numbers necessary for your needs. The world is your oyster so you can always add a new Backup Savings Account goal once your first goal is achieved.
- Never touch the principle – the original savings-investment amount (your Backup Savings Number). Unless it is an absolute Yes, using the finances to cover an expense that is the main purpose of the fund.
- If money is used from this account, the immediate next plan is to restore the principal removed.
- If the money used from this account is from the interest earned and the principle is untouched, choose whether to restore the amount or place your financial energy elsewhere.
- Aim for a consistent savings rate for each time you earn money to go into this account. A percentage of your income that you can always save away.
- It is an uplifting driving force to achieve your fund goal when you can firmly say, “X% of my earnings every paycheck is mine to KEEP”.
- Starting small is wonderful and powerful yet it is encouraged to have this consistent savings percentage be your minimum while the goal is to have a savings rate that is as high as possible.
- Through the Financial Independent Movement methods, some people have savings rates as high as 70-80% of their incomes. You can do it too!
- House these savings in a liquid/accessible financial vehicle.
- When storing your money away each month in a financial institution account, you earn an interest rate that will help it grow while having the freedom to access it making it liquid/accessible.
- Online savings accounts have higher interest rates as they don’t need to pay for a physical brick and mortar location. The caveat is the method to withdraw or deposit to it may not be as simple to access as a regular bank. This shouldn’t be a hold-up, ask yourself the question, “How can I make this work for me?” Many local banks are joining the revolution of the Online Savings Account opening up many opportunities for you.
- Tuck money away the fun way!
- Use a printable coloring chart to customize your experience and continually fuel your motivation and growth! You will reach your end goal sooner than you know.
With a Backup Savings Account, your options for choice in life are expanded. When this fund is housed in a financial vehicle that returns interest (the higher the better), it creates more funding while it is not needed to cover an expense. With a backup savings account you can have more flexibility when desiring to change careers, make a one of a kind investment, support yourself when unplanned financial changes occur. Think of this fund reserve as a backup because, when you are in need, this fund has your back! Give it love, and it will love you back – you are deserving of its love.
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