What's the one thing people forget when aggressively trying to pay off their debts?
What was it that saved my client's business when the unexpected happened?
Although I mentioned this in last week's blog, it's worth revisiting again.
Before you pay off your loans, build your savings to take care of at least one month's expenses!
Because you need a good defense to compliment your offense if you're going to win the money game.
So often, we get so focused on paying off our loans, we forget that life happens. Our life does not work in a calculator! Stuff happens, right? (G-Rating just applied)
Maybe you have done what I used to do where I would focus my extra money paying down loans and then wonder why I would have a credit card balance from time to time. You're happy when you pay them off, but feel guilty when you charge them up again. Your money feels like a rubber band that grows and shrinks.
I told you one month's savings, but will want a lot more than that. One month is just the beginning. 6 months in your business and your personal savings is the next goal. Make sure the money is easy to get to (liquid) by keeping some in cash and some in the bank.
What if I don't have extra to save each month?
Great question! Subscribe so you can download my "7 Secrets to Free Up Cash Today" and have more money to save.
Not having savings could not only cost you interest on a credit card, it could cost your peace of mind, thousands of dollars in income you would never see due to a scarcity mindset, and maybe even your business!
For instance, I worked with a couple in New Jersey who thought I was nuts for asking them to keep some money in savings even though they could pay off some credit cards. However, when Hurricane Sandy came to town, their practice had to shut down for 2 weeks dealing with the damages.
How many of us would be stressed if we had to pay our employees, repair costs, and bills, but didn't have money coming in for 2-3 weeks, especially when it can take months before insurance pays you back?
They called me a few weeks ago and admitted that their practice would have had to lay off all employees and shut their doors if they didn't have the reserves I recommended. That really made my day! They weren't the only ones. I heard that dozens of times last year from others. Why was I so confident? Because I screwed up too when "crap hit the fan" in my life. Isn't it amazing what life teaches us? I'm just glad others could experience joy from my pain ;)
What do I do?
Start saving immediately! Start with one month before paying any extra to your loans. Please leave a comment below about how savings has helped you, or questions you have.