Setting your Priorities for Family Savings

saving money familyThe bill waiting for the signature of President Obama where the wealthier ones will have to pay higher taxes compared to those who are in the middle class is a precautionary measure of the state in another round of fiscal crisis looming. This sends a message that people need to prepare for tougher times. What will really help families is to set priorities when it comes to finances and savings. Having a job could provide some sense of security, but having a source of income is not a complete guarantee. You have to ensure that you make very good use of the influx of money into your household.

Here are some tips that you save for the hard stretches.

The 20% Rule

Experts’ advice says that the standard rule is to save 20% of your income every month. A person who earns $2000 monthly will be able to save $4800 in a year by just religiously adhering to save a fifth of your income for 30 days. But again, the secret sauce to this is discipline—which leads to the next tip that is the right formula to savings.

The Right Formula to Savings

Wrong Formula: Savings = Salary – Expenses

Correct Formula: Expenses = Salary – Savings

You see it right. You do not fit in your savings according to your expenses, but it is the other way around. It could be difficult to swallow at first, but this formula’s tried and tested. This would also entail cutting off on some of your expenditures that again would demand for discipline. This would be extra challenging for those who are breadwinners in the family. It is not a secret that when you shoulder majority of household’s expenses, there are quite a few times that emergencies will arise. It is helpful to allot a portion for unexpected outgoings from your salary.

Create a Monthly Budget

Well having something that you can refer to that can tell if you are within your means or going overboard is a good tool to set your financial priorities. Create a monthly budget that consists of your overall expenditures for the next few weeks until you receive your next compensation. Do not omit the 20% savings rule.

 

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