Why Save? There are many good reasons. Here are some of the most common ones:

a. Building an Emergency Fund
b. Kids’ Education
c. Large purchases (including a home)
d. Starting a business
e. Retirement
f. Charitable giving

If your paychecks stopped today, how long would it take until you were unable to pay your bills? Here’s a multiple-choice set of answers to that question. Which answer would be closest to your own?
1. Two weeks
2. Two months
3. Two years
4. Never

For many Americans, a time period somewhere between two weeks and two months is a reasonable estimate. Is that enough? Most books on personal finance say no. Most authors recommend having an emergency fund of at least three to six months worth of net income.

How can you decide for yourself what an appropriate amount might be? See the money game “HOK and GOK”1 for some good guidance.

Why is it that most of us never seem to get ahead? For us, it was always the “emergencies” that kept depleting the savings we were trying so desperately to build. Somehow, every time we started to accumulate any significant amount of savings, something would come along and wipe out all our progress. Do you feel like that too? If so, read on – there’s hope!

Here are some of the emergencies that did us in:

• the washer or dryer would break
• the car insurance came due
• our property tax bill would arrive
• the purchase of Christmas gifts would wipe us out
• the license plates for the cars would need renewed
• our wood fence would blow down and need replacing
• one of our cars would need major repairs

Every time our Credit Union savings account would build up to any sizable amount, one or more of the above emergencies would happen. It was uncanny and very distressing.

Finally, the reality dawned on us – most of these “emergencies” weren’t emergencies at all. They were events that happened with regularity. The car insurance was due twice a year every year. The property tax bill came every year. Christmas came every year. Anything that could break eventually would break. The real problem was that we weren’t setting aside any money in advance for all the events that happen over and over and over.

The solution wasn’t elegant, but it was simple. We made a list of every expense that happened with some kind of regularity, made an approximation of what each expense would average every year, divided each of those totals by twelve, and started setting aside money for each item every month in advance(!) in a separate account from our credit union savings account.

Did our savings build overnight? No, we felt more like woodpeckers than lumberjacks as we tried to cut down our “tree” of emergencies. We didn’t have a lot of surplus to set aside (like a lumberjack’s chainsaw) so we had to take little pecks one at a time like woodpeckers do. Just like the birds though, enough pecks and eventually the tree will fall. With time, we started having plenty of money set aside to cover all those “emergencies” as they came along. Sweetness!

You can save money. Just follow these easy steps and you will be well on your way:

1. Make a list of all the large expenses that you know will come along every year.
2. Determine a yearly average cost for each one.
3. Divide the totals by twelve, and set that amount aside every month for each of the items on the list you made in step one. You know you will eventually have those expenses…why not be ready for them?
4. Set up at least two separate savings accounts – one for true savings, and one for all those things on your “things I need major money for every year” list. As you become better and better prepared for those large annual expenses, your true savings account will start growing and keep growing!
1Petrick, Randy. Money Games: Eighty-five Fun Ways to Save Money and Attract Abundance. New York: iUniverse, Inc., 2008.