Building a cash cushion should be a priority — just like planning for your retirement. But unfortunately, many people get caught in a trap of spending money and completely forget the importance of saving for a rainy day. But even if you don't have a dime in savings, you can take steps to build your account. Here are seven reasons to get serious about building a cash cushion.
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Plan the Wedding You Want
If you depend on mom and dad to pay for your wedding, you might not get the wedding of your dreams. However, building a cash cushion can potentially bring your vision to life. Your folks might be able to kick in some money; and if you also add cash to the pot, you can plan the wedding you and your partner want.
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Prepare for a Job Loss
There is no such thing as true job security — just ask the thousands of people who are laid off from work each year. And unfortunately, if you don't have a cash cushion, you might be unable to survive this financial setback. Don’t count on unemployment to get through these tough times. Oftentimes, unemployment is only a 1/3 of your regular salary.
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You Have a High Deductible
Whether it's your homeowner's insurance or health insurance, a high deductible can put a heavy burden on your shoulders, especially when you need to file a claim or use your insurance. But if you plan for this expense and set cash aside to cover your deductible, you won't have to rely on a credit card or borrow from relatives.
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You Want to Pay Cash for Your Car
Some people despise monthly payments but if you need a new car, getting a loan might be the only way to get a new set of wheels. However, if you save your money and build a sizable cash cushion, you might be able to pay cash for your car.
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You Want to Buy a House
There is nothing wrong with renting but if you want your own place, and if you’re tired of yearly rent increases, buying a house might be the answer. Unfortunately, purchasing a home requires a minimum down payment of 3.5% to 5%. Getting serious about saving your money can help you reach this goal sooner.
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Love is like a friendship caught on fire. In the beginning a flame, very pretty, often hot and fierce, but still only light and flickering. As love grows older, our hearts mature and our love becomes as coals, deep-burning and unquenchable.
Unexpected Costs
It doesn't matter how well you plan, unexpected costs will occur. And if you don't have disposable income, you might have to use a credit card or borrow money from family. This is where it pays to have a cash cushion. When these costs arise, you can dip into your savings account.
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It’s the Smart Thing to do
Even if you don't have a specific goal in mind, saving money is financially responsible. This way, if you ever decide to make a major purchase or set a long-term goal, money in your bank account gets you a step closer. Going forward, deposit 10% of your pay into savings. And if you don't have any disposable money, get creative and think of ways to generate extra cash.
Building a cash cushion is not easy. It requires sacrifice and a lot of discipline and unfortunately, some people fall off before reaching their goal. But if you recognize the benefits of saving money, it'll be easier to develop a routine of paying yourself first.
What are other reasons to build your savings account?
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