Savings

agape_0001_iStock_000027569752Small-Financial plan

Two simple words about savings: do it.

Savings is the amount of money that you have remaining after you pay your personal expenses. For many of us, the way to avoid the temptation to spend it could be to have a portion automatically deposited in your savings account. Check to see if your company matches part of your contributions to their 401K plan.

Good Habit

Get in the habit of saving a portion of any increase in income or decrease in expenses, gifts, and windfalls. Too often people will increase their consumption to eat up any margin a raise gave them.

Safety and Flexibility

It is sometimes more important to have a return of principal than a return of principal. How much liquidity (access to cash or items easily converted to cash) do you need? Although each person’s situation is different, a good rule of thumb is to set aside 6 months of salary in liquid assets. Although you may not need it for a specific need, you will have the flexibility to purchase stocks or bonds when they are a good buy.