You have been financially responsible all your life. You worked hard and put money away toward retirement for years. It can be more than disheartening to watch your nest egg deplete from medical bills, unemployment, unexpected repairs to your home or another catastrophic and unpredictable event. When you find another job or the catastrophe has passed or at least leveled, how will you rebuild your savings and still meet current obligations
Once you have a solid outline of your new income level, you know how much money you have to work with each month. Now it’s time to delineate every known expense, regardless of how small or frivolous. Note your set expenses, such as mortgage or rent, insurance payments, fuel, and credit debt payments.
Annotate by each credit and loan entry those that accrue interest and the rates. You help identify those bills that are costing you extra money to have, thereby, setting an informal priority list of debts to eliminate or reduce quickly if possible.
For food, utility bills and other adjustable expenses, note the highest amount you have paid during the last two years. If the bills total less, you have extra funds to contribute to your savings rebuilding project or toward the high-interest debt amounts.
Eliminate all the extra, voluntary expenses you can. Cable, phone duplication between a landline and mobile phones, Internet access from home, fancy coffees, bottled water and meals from restaurants and vending machines are only a few extra expenses on which people intend on having a financial cushion focus.
Reconfigure Your Budget
Take all your known expenses and your estimated but revolving bills and reset your budget. If one of the set expenses each month is not paying yourself first — depositing a predetermined amount into your savings or investment account, it should be. The savings adage, “pay yourself first,” is almost cliché for a reason: It works time and again.
You can add the excess funds at the end of the month to further bolster your plan of regathering at least three to six months’ of expenses in reserve.
Even if it’s an equivalent of a few dollars per week, make that payment to yourself your first priority each month in some sort of interest- or capital-gains account.
Where to Invest
Make your money work for you. Keeping your rainy-day fund or your retirement nest egg sitting in a no-interest checking account may make those funds easily accessible in an emergency, but it also makes it easily accessible for non-emergencies — a detriment you want to avoid.
Instead, keep the funds close but where even a small return on your investment in yourself is possible. Shop around for good savings accounts, short-term CDs, or possibly bonds or stocks if you’re experienced in that kind of investing.
Don’t let your money sit dormant. You worked hard for it. Make it work for you as you reduce your debt and rebuild your savings and retirement funds, gaining that confidence and peace of mind once again.
Written by Jaye Ryan, a freelance author who enjoys sharing tips and hints for financial security.