For a large number of people, finances and anxiety go hand in hand. Breadwinners constantly worry about not having enough, or not being prepared for circumstances such as redundancy, accidents, disease, and death. How will the family survive? How will one cope if such a situation arises?
Though such misfortunes cannot be completely prevented, there are ways to mitigate their impact. We’ve put together a roadmap that lays out the best way to save money for future events—both good and not-so-good—so at the very least, you can put your anxiety to rest.
See where you’re headed—then set goals
In the early phase of your financial life, you will be focused on establishment: your career, your family, mapping out your goals and your plans for the future.
Clarity is important: what are the non-negotiable things for you? You can have short-term goals and long-term goals but the important thing is to map them out so you can easily create achievable steps on the way to your objective.
You need a budget
Since you already know your goals, make sure that you are aware of exactly how much money you have, and how much should go to each one. In short, have a budget: the best way to save money for future purposes is to allocate your income habitually.
The simplest budget you can draw up allocates your income into three “baskets:” one for your needs (like bills and groceries); one for your financial goals (like building an emergency fund or investments); and one for your wants (like a new cellphone or weekly date night).
The “50-30-20” rule proposes a healthy balance for each “basket”: 50% should go to your needs, 30% to your wants, and 20% to your savings and investments. The percentage proportions represent a healthy balance between needs, wants and future investments, but the ratio can (and should) be adjusted to match individual life circumstances.