How can I save for the unexpected?
Apr 21, 2009
Great question.
This is a challenge for many people and especially for those in the position to borrow. These people figure that if they fall victim to a significant expense, they can just borrow the money from the bank or use a credit card. And…as we all know, this is costly; principle and interest over a fixed period always adds up to more than you need.
For example, your car breaks down and you need $1500 to fix it. You end up using your credit card or you take out a loan since you don't have the money saved.
If it's going to take you 18 months to pay it off, this is what it will cost:
An 18 month loan with an interest rate of 9% will cost approximately $89.50 per month. The final bill for the $1500 repair is now $1609. That's the cost of borrowing.
Charging the same repairs on a credit card and taking the same amount of time to pay it off is even more costly. Taking 18 months to pay off a credit card with a 19% interest rate will cost $96.50 per month. The final bill for the $1500 repair is now $1737. That's the cost of borrowing with credit.
One way to save for the unexpected is to always “PAY YOURSELF FIRST”. Did I catch your attention?
How does this work? When you get paid, decide on a set amount which you can put away before you spend it. By putting a little bit away each month into an account, separate from your regular spending, you will start to see your savings grow. And with the miracle of Compound Interest working for you there will be a slush fund available for a special purchase or that unexpected expense.
Want more info, contact a Wealth Management advisors at Allard Insurance Agencies Ltd., a subsidiary of Nelson & District Credit Union at 1-877-352-7207 or visit www.yourfinancialhike.com.
Get Saving!!!
ZDog
