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Why you need a savings account
By plrprousers | September 26, 2009
When fighting your way through tough economic times, it is better to try and face down these money troubles instead of closing your eyes and hoping they’ll go away. They won’t. There are many steps you can do to minimise the impact of the economic downturn, and they must be taken now.
Accumulate funds for emergency savings. It is important to save money in an emergency savings fund where you have immediate and penalty-free access. As a general rule its good to have enough in your savings to survive without an income for around three months. The best place to park this money would be in a high interest savings account.
Increase Your Savings. Set up an automatic savings plan. This arrangement enables you to set aside specific amounts of cash automatically transferred from a checking account to savings accounts earning high interest or to a mutual fund of your choice. It is important that the money go into a high interest savings account but remain available. Simply having a retirement fund is not enough as you can’t get access to that money now.
Cut spending. An obvious suggestion but it can seem difficult to achieve. Lump into one account all the phones at home (landline and mobile). You can get discounts from telecommunications carriers this way. It also doesn’t hurt to talk to at least two carriers to look for the best deal. Spend less on your grocery bill by choosing supermarket own label brands, going to markets or joining a local food co-op. Bum rides in a car pool or take public transport instead. If you have two cars and one is seldom used, consider selling the other one. Put all the money you save in an online savings account intended for the rainy days.
Slash credit card debts. You have to find ways to stretch your money further in tough times. It does not make sense to shell out your hard-earned money to pay 17 per cent (or whatever) interest on credit card debt. Try to pay off in full the balance due each month; if that is difficult, at least pay much more than the minimum amount. Consider moving from credit to a Visa debit card
Increase household income. During a recession this can be difficult. You may be able to find creative ways of bringing in extra funds using your skills. If you have a skills such as writing or any other service people may require then you could offer your services as a freelancer online or in your local area. The partner in a one-income household might consider taking on odd jobs. You could start a small business which might blossom into something bigger once the recession is over.
Utilise allowable tax deductions. Be on the lookout for tax deductible expenses such as education, charitable donations and your home office. Stay organised and strict with logging your expenses and receipts to support tax claims. Put the money saved on personal tax deductions into your high interest savings account.
Spruce up your résumé. Recessions can lead to more layoffs. It is best to polish the résumé to make it current, in case the need to apply for a new job arises. Condense the résumé to one page, as much as possible. Make it presentable, but not flashy. Your relevant work experience should stand out.
Act quickly to protect your finances from the recession. This will give you a strong sense of purpose even as it shores up your position.
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