I saw a blurb on social media that quoted an article from Time Magazine that stated 51% of people earning $100,000 a year are living paycheck to paycheck! That really shouldn’t surprise us. From reasons like people feeling entitled (they should buy what they want when they want) to the impact of inflation, it’s easy to spend all the income we have coming in.
In December 2022, 51% of people who earn more than $100,000 reported living paycheck to paycheck, which is 7% more than the previous year, according to a survey from financial insight and advising companies PYMNTS and Lending Club.
Time Magazine
What happens when you have that unexpected auto repair, an appliance breaks down, expenses for the kids come up, or you need money for work expenses? How do you pay for it? Do you have the cash set aside or do you pull out the plastic? We all need to work towards having money ready when the unexpected happens because it will happen.
On any financial journey the first thing you want to take care of is having that savings account funded to prepare for the unexpected. How much should you have for those unexpected things? At a minimum, you should have $1,000-$2,000.
If you are renting or living at home, you can be comfortable on the lower end. If you are a homeowner, you will want to be closer to the higher end of that range.
Start setting aside money out of your next paycheck and stay consistent until you have the dollar amount you feel comfortable with.
Remember, this is not money you are investing. This is savings. While you would like to earn some interest on the money you are saving, that’s not your primary goal. You are building an emergency fund. I strongly suggest you open a separate account that is only for your emergency savings, otherwise it can become too complicated to keep it separate. You can open an account at a local bank or credit union; or open an online savings account and tie it to your checking (for easy access when you need the money).
Automate the deposit. Have it come directly from your paycheck. If that’s not an option, set up an automatic transfer out of your checking account. The key is to automate it.
This is the first step to having an emergency fund. Your ultimate goal is to have 3-6 months of your net (take home) income saved. We will explore this further in another post.
Prepare for the unexpected.
Save money your way.
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