The Importance of Saving and Creating an Emergency Fund

Recently I was talking to my portfolio manager and she started giving me some really cool common sense tips about how to save. I was feeling a bit under the weather, as a recent IPO that I had invested in crashed.

It was then she told me that far too many people live from one paycheck to the next, having just enough money to manage their monthly bills and expenses. Some have no savings at all, leaving them vulnerable in an emergency situation. It’s important for each household to start putting together some sort of savings account and to tuck money away for a rainy day. This emergency fund can be used in case of a disaster or crisis that arises in the future. Without it, families would be left to struggle severely. I felt like I need to record some of her tips. Where else to do it best but my blog (my go to diary to be honest).

Save By Choosing More Affordable Options

Say a person is doing a home remodel. There are ways to find more affordable options and pay less for the job. It doesn’t always have to be incredibly expensive to make upgrades to a home. People can upgrade a kitchen for less by simply adding wallpaper or a coat of paint instead of changing out cabinets and appliances. Doing projects yourself instead of hiring an expensive contractor is also a way to save. Set a budget and always stay under it, leaving yourself some extra money to save toward your rainy day fund at the end of the project. 

This doesn’t only apply to home renovations. It’s always possible to choose more affordable options when making purchases. Even when it comes to the grocery store people are able to pick the cheaper store-brand options instead of name-brand items. This helps you save significantly. Put the few dollars you didn’t spend at the store toward your emergency fund. 

Save By Staying Home

People tend to grab a coffee on the way to work or stop for lunch in the afternoon. These costs can add up quickly. By staying home for an extra few minutes in the morning and making coffee there, it saves money. If a person buys a can of coffee grounds and some creamer for just a couple of dollars each, and it lasts the entire week, that is a far cheaper expense than spending $5 on Starbucks every day. Most meals, snacks, and drinks should be purchased from the grocery store and made at home rather than getting them from a restaurant while out and about. It prevents overspending and is an easy change to make if people try.

Save Through Investing

Rather than trying to penny pinch whenever possible, people can use some saved money for investments. Look into current stocks, possible real estate options, gold, and more to find a choice that feels right for you. Investing can turn a small amount of money now into a larger return in the future. Having a few different types for a diversified portfolio is also ideal, ensuring there’s always a profit even if one of the options fails.

Saving money isn’t always easy, but it can be done with some dedication and desire. Those who desire an emergency fund when things get tough can use their dedication and hard work to make it happen. By cutting back on some expenses and avoiding unnecessary purchases, a savings account can start to grow quickly. 

Save Through Tax Credits

Tax credits can help tremendously when April rolls around. Before taxes are due, anyone filing can add their credits to the list to ensure they owe less and receive more. Saving and itemizing deduction through receipts is one way. Putting more into retirement savings like IRA is another. If you have done something novel and out of the box, put that in as well. Installing a solar energy system is one way to get a credit. Those in the state of Utah, for example, receive a credit on their taxes if they have a solar system installed, create an account with the Governor’s Office of Energy Development, and complete a solar PV application. Those approved for the Utah solar tax credit receive a TC-40E form that can be used when filing. 

The Renewable Residential Energy System Credit is applicable for 25% of the total system cost but is not to exceed $1,600. Anyone thinking of converting should do so as soon as possible because the benefit won’t be given forever. Money received from federal or state taxes each year should always be applied toward an emergency savings fund to use when problems arise throughout the remainder of the year.