Leaving Yourself Some Financial Cushion

Have you ever been at a point in your life when you were living paycheck to paycheck? If so, I’m sure you got quite creative with moving money from one account to the other at different times of the month. It’s not the easiest thing to do, but you learn to survive. Some people are even forced to take out payday loans.

Living paycheck to paycheck is not only very difficult, but very stressful. While working part-time in high school, I saw this first-hand. Many of my adult colleagues were working the same minimum-wage job (or barely above that) and trying to survive without any sizable savings. They failed to have any concept of an emergency fund – or at least no way/will to create one.

Planning Ahead Reduces Stress and Increases Freedom

One of the easiest and best ways to improve your finances is to provide yourself with a cushion. By taking the time to sacrifice now and build up a little extra cash, you can save yourself a lot of stress. Why worry about whether your check is going to clear in time to pay the bills or how many late fees you will have to pay.

Instead, use the cash as a reserve. Once you use some of it to pay for your bills, use your very next paycheck to build that back up to a certain point. If you are able to stay committed to that, I believe you will not only live a less stressful life, but save money in the long run. You will pay less money in interest, late fees, and favors to pay people back for “family” loans.

The best way to manage your finances is to stay ahead of schedule. Plan ahead of time and be prepared for the bills that you will have to pay next month. It may be difficult to save up that reserve at first, but it will be worth it in the long run. Once you have accomplished that, you can start protecting yourself against major expenses with an emergency fund.

photocredit:  roberthuffstutter via flickr

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