How to Rebuild Your Savings Account After a Large Expense
Savings accounts are important for getting you through the tough times — like being laid off from your job, or dealing with an unexpected medical expense. But they also come in handy during the good times — for example, taking that dream vacation, or putting a down payment on a car or home. Life is full of events that rely on your savings, but when you have easy-to-use tools like Quicken Starter Edition, starting over is easier than you’d think.
Start Small
You’ve just incurred a large expense, so it’s okay if your savings account doesn’t bloom again overnight. You may have to start small. Perhaps you’ve heard that saving 10 percent of your income is ideal, but if all you can manage is two percent, that’s a step in the right direction. You can always increase it later when your income goes up. If you’re not sure how setting aside that money will affect your overall budget, Quicken Starter Edition lets you preview the impact different dollar amounts will make on your ongoing cash flow.
Meanwhile, go crack that closet door you haven’t opened in six months. “Everyone has stuff laying around the house that they aren’t using,” says Rob Andersen, founder of the website Mustard Seed Money. “Selling those items through craigslist or eBay takes a minimum of effort. You can quickly turn them into cash to start rebuilding your savings.”
Don’t Spend That Extra Money
Life comes with occasional windfalls, too, like work bonuses, tax refunds or that lottery ticket that turned out to be worth a little more than the paper it’s printed on. Don’t spend the money frivolously; instead, send it directly to your savings account.
However, if you need some extra money to catch up on bills because you’ve lost your job or suffered an illness that’s keeping you out of work, you might consider freeing up some cash by cutting back on your cable service or cell phone plan, if you can do so without incurring a financial penalty.
Look at your budget to figure out what you can live without until you get back on your feet, then try to direct at least a portion of the money you free up toward savings. Quicken Starter Edition shows you where your money’s going at a glance so you can easily regroup. It even helps you devise a new budget based on your current needs.
Pay Yourself First
The old adage is that you should always pay yourself first. In other words, save some money before you start paying bills. At the very least, make savings another must-pay expense like the electric bill, arranging for automatic deposits. With Quicken Starter Edition, you can create a budget that incorporates the money you set aside for savings as a weekly or monthly expense.
Andersen also advises to be smart about the way you save. “Preferably, your savings account will be held with an online bank such as Ally or Capital One 360 that pays interest rates at about one percent. Brick-and-mortar bank accounts typically pay interest at a rate of about 0.05 percent.” That’s a big difference, and it can help your savings grow faster.
Take a moment to be glad — and proud of yourself — that your savings were there to cover that big event (whether good or bad), then get back in the saddle. You built up a savings account once, and you can do it again. If you need help, Quicken Starter Edition has your back.
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