Many Americans are in precarious financial positions.
According to a recent BankRate.com survey, 33 percent of Americans claim they do not have more emergency savings than credit card debt. More than 20 percent say their credit card debt exceeds their emergency savings, while 12 percent indicate they have neither any savings nor credit card debt.
Fortunately, the numbers are trending in a positive direction. In 2017, more than 40 percent of Americans were unprepared for emergency expenses—the sign of a stronger economy, perhaps due to federal tax cuts.
But millions of Americans are still struggling to save money and pay off debt.
If you’re one of them, think of it as a two-step process. First, direct a chunk of your income every month to debt payments to bring down your total obligations. Whatever is left over can be saved, but prioritize dropping your debt obligations to zero as soon as possible.
Once your debt is paid off, try to save more than you spend. If that’s not possible, make sure to send a definitive percentage of your income to a savings account—and see your money accumulate interest over time. Automating your savings through direct deposit can help you build a saving habit and resist spontaneous spending.
You should have three to six months’ worth of living expenses set aside in case of a sudden job loss or to cover an unexpected payment. If you can pay off a mortgage or cover rent for six months straight without any income, then you’ve met your saving goal.