Common Cents

There is a plethora of information out there.

With times being what they are, there is even more coverage, more scandals and more conflicting information.

Are we at the bottom?

Is this just a sucker’s rally?

Where does one even begin?

What makes sense for you?

Who do you trust?

It’s overwhelming.

When it times are crazy, going back to basics, makes a lot of sense.

These are the things you already know.

But knowing doesn’t always translate into doing.

Even if you have not done all the “smart” things, there are still things you can do to lessen the stress that you may be feeling. Some have it a lot worse than others but nothing is set in stone and it is difficult not to get swept up in the fear and the worry that is pervasive.

I read an article recently that goes into something relatively small, attainable that everyone can do. And in doing so, bring a measure of security and sense of control.

We all know that we should have an emergency fund that will cover our expenses for at least three months if not closer to six months to a year.

This can be a daunting task- so seemingly out of reach that a lot of people will not even bother trying.

$500.

That is all it takes to make a difference in how one looks at one’s financial situation and one’s perceived ability to deal with what may or may not happen.

Sure, many people will point out that it would be easier to save money if you made more money. That isn’t always the case. People tend to spend up to one’s earnings but there was a really interesting revelation.

The difference between those with at least $500 saved compared to those who didn’t was negligible- when looking at the two lowest income groups. For low-income households (under $25000) the median income for those able to save $500 was $18000 versus $17000 for those who didn’t. For moderate-income households (between $25000 and $50000), the median income between those with at least $500 saved and those who had less was $38000 compared to $37000.

So what were the main differences between those who were able to save at least $500 versus those who couldn’t?

Habits- having a budget, savings goals and or automatic savings.

The trick is to figure out what works for you and stick with it.

A friend of mine throws all her change into a jar. When it is full, the change is rolled and deposited in her bank account- we are talking hundreds of dollars (it’s a big jar). There is a certain satisfaction in accumulating a good chunk of money with very little effort. This is something anyone can do.

Others budget by allocating cash for monthly expenses into different envelopes. Credit cards can be dangerous because it doesn’t feel like you are spending real money. Having crispy bills in envelopes makes it painfully real. There is no guessing when you have reached the limit on your clothing or entertainment budget- your last few coins will dictate your action (or inaction). This would be a very good exercise for people who are out of touch with what their life really costs and where their money goes- especially if they are unwilling to catalogue all their expenditures.

I just think about the pain I have to go through to earn enough money (after taxes) to pay for something and that is usually incentive enough for me to walk away and rethink my “needs.” I have big dreams, big goals and as much as I like to have fun, I can enjoy myself with one or two pints and not five or six.

$500 is a starting point…. When you hit that goal, find another and keep moving forward. You are not saving just to have money in the bank. You save money for what it represents.

Money = Options

Build the foundation to achieve your goals- whatever they might be.

And it could literally start with the change in your pocket.

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~ by angryegg on March 29, 2009.

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