Savings

There are five things you can do to make sure you have an adequate safety net in place.  This is a quick five step process of ensuring you have a backup if unforeseen events should arise:

1.  Have 6 months of living expenses saved.  This can be in the form of I-Bonds, CDs, or a regular savings account.  You want a mix here where a good portion of your money is liquid and easy to get to.  I-Bonds and CDs would likely have penalties for early withdrawals but pay higher rates.

2.  Try to develop multiple streams of income.  Try to develop a skill where you can earn money from a different avenue (i.e., selling a product, consult, etc).  All your eggs in one basket proves to be very risky as a strategy.

3.  Invest in yourself.  Education can come in a variety of ways.  Take classes at a local community college and develop a skill or go for a certificate.

4.  Proceed with caution when using debt.  Debt is a part of modern life.  Unfortunately, many people are unable to use it wisely.  Make sure you never spend more on your credit card than you can payoff at the end of the month.  Don’t spend too much on a car.  I’d recommend spending no more than one-third of your annual salary on a car purchase and this should be the upper range.  You can find great used cars on Craigslist that will do the job.

5.  Invest.  Make sure to get into the habit of saving money.  Controlling your expenses and investing will lead to long-term financial security even in a volatile market.  Most people live paycheck to paycheck unfortunately and end up on a financial tightrope.