Rosalind Evans
In an economy punctuated by layoffs and the spectre of recession, one truth emerges unscathed: the imperative of saving for unforeseen events remains. With the Consumer Price Index escalating by 6.4%, per February data from the Bureau of Labor Statistics, the squeeze on discretionary income is palpable. This heightened cost of living underscores the necessity of a sound financial strategy to fortify oneself against economic volatility. Whether you’re commencing your savings journey or looking to bolster an existing one, the following seven-step guide, articulated by financial experts, serves as a beacon through the tumult.
1. Understand your income and expenses:
“It is more important than ever to have a strong awareness of your cash flow,” asserts Gerald Grant III, a financial planner aligned with Equitable Advisors. Scrutinizing income post-tax and tracking all expenditures, including the trifecta of housing, food, and transport, is crucial.
2. Reduce your expenses:
Grant emphasizes the need to discern between essential and discretionary spending. Pruning the latter can convert expenses into savings, potentially facilitated by technology like Trim, which assists in managing subscriptions.
3. Increase your income:
Clint McCalla, a financial planner at LourdMurray, advocates for side gigs and maximizing earnings within one’s career. The goal is to transcend the frugality ceiling.
4. Automate your savings:
Automation eradicates the procrastination associated with saving. Opt for interest-bearing savings accounts and align automatic transfers with pay increases to counter lifestyle inflation.
5. Manage your debt:
With credit card debt soaring, as reported by the Federal Reserve Bank of New York, prioritizing high-interest debt elimination is vital. Debt consolidation and counselling services like the NFCC can offer strategic relief.
6. Build an emergency fund:
A robust emergency fund is a bulwark against life’s unpredictabilities. Initiating an automatic transfer to a high-yield savings account can be a step towards a six-month expense cushion.
7. Invest in your future:
As Susty Beeharry from IFM SA suggests, investing should be a calculated and diversified pursuit compatible with one’s risk tolerance and financial ambitions. Tax-advantaged accounts are instrumental in this endeavour.
Establishing a financial buffer is not a one-time event but a continuous process that adapts to life’s dynamism. It requires commitment to debt reduction, emergency preparedness, and future investment. As our experts have outlined, the path to financial resilience is through informed, proactive steps that transform today’s earnings into tomorrow’s security.
