One of the “baby steps” I took when first sorting out my finances was stashing away $1,000 in my emergency savings. It took me about a year and a lot of creativity and hard work to reach that milestone, but I did it!
But what comes next? Once you have enough for an emergency and don’t owe anyone any money, shouldn’t you be free to spend your money as you please? According to financial gurus like Dave Ramsey, there is more you need to do. You need to protect your money and yourself by preparing for the future. Specifically, you should add to your emergency savings with enough money for 3-6 months worth of expenses.
As a teenager, you’re probably like me – you don’t have many, if any, bills! It’s certainly different from our parents who pay for the mortgage, the groceries, the utilities, and more each and every single month. Really, the only expense you may be footing the bill for would be a shared cell phone plan, a car payment (or insurance, or gas), or an activity here and there.
How You Can Plan for an Expense-Filled Future
Just because you’re free of most monthly bills, you should still consider saving up for what you will have to pay for in a few years. Look at your life once you turn 18 or 19. What would happen if you lost your job and cannot get a loan? How would you pay for your tuition? How would you work it out with your car insurance? If you plan on living on your own, what about rent, utilities, and groceries?
There is a reason why so many of our parents have a tough time saving any money. When you have bills already, it can be hard to save enough money for the future, especially if you are working a lower paying job or only working part-time while you are in school. There is also the temptation of spending all of your money as it comes in. So many of us see a paycheck and think that we can spend it all on whatever we want without considering that anything could happen tomorrow. You could lose your job or a medical emergency could cost thousands.
Instead of risking your future (even if it is far off in the distance), make a promise to yourself to live life frugally. Pick a college you can afford (preferably without student debt) not one with a massive price tag and few scholarships. Or make a plan to take on a part-time job so you can have extra money to put into your savings account.
Saving early, coupled with looking for ways to reducing your future bills can mean preventing a financial disaster that may come in the future. In addition, it can lead to more financial freedom such as taking out zero student loans or getting to move out of the house faster!
3-6 months of future spending may seem impossible, especially when you are not paying those future bills today. But with hard work and dedication you can achieve this big milestone and set yourself up for financial success as an adult.
I’m working on saving up in this area now. I’m also saving for college expenses, retirement and have recently started a wedding envelope. No, I’m not getting married any time soon but hopefully I will one day. I want to have a nice wedding and I want to pay cash for it so it makes sense to start saving now. I don’t have that much in any of my envelopes but something is always better than nothing!
be centsible and Happy New Year!