Let’s face it, saving money is hard. If you’re lucky enough to have something left at the end of the month the chances are you’d prefer to fritter it away on booze or gadgets rather than putting it aside for a rainy day. Research suggests that 40% of us fail to put anything away at the end of the month.
So what’s going to get you saving? A good analogy, of course. The Wall Street Journal suggests a new method for planning your savings, looking at them as if they were a chest of drawers in your bedroom (hopefully not the cheap ones from Ikea that you’ll inevitably cram far too many pants into and will fall apart after a couple of months):
Think of your various savings needs as something like your bedroom dresser. How well you fill that chest of drawers will determine how much financial flexibility you have and what kinds of choices you can make later in life. Just as you have to have that all-important underwear drawer, you need an emergency-cash drawer. This drawer will give you daily comfort and keep you out of trouble, allowing you to pay the bills for a few months if you lose your job, get sick or face a financial emergency… Just as you need a sock drawer, you also need a retirement drawer to keep you warm in your later years. If your company still provides a pension, that drawer may be filled for you. But most of us need to contribute to it, and the tax incentives make that an attractive place to put your savings.
Yep, they stretch the analogy way too far, but it’s probably a good a way as any to start you thinking about what savings you need, even if it’s not really a proper savings plan.
photo credit: Tom T
Very much like the old envelope system.
My Well Of wealth
40%! That’s scary, and I strongly suspect in the current climate that percentage is edging ever-upwards.
I’m glad not to be a part of that statistic. :)