Lisa Simpson
May 14,2010
In: Finance

The Dollar Can be Stretched by Planning and Frugality

The dollar can be stretched by resorting to planning and frugality.

The dollar can be stretched by resorting to planning and frugality. Paying off bills is as important as paying into the savings kitty of yourself. This has to be maintained even during rough weather as far as possible.

Sandra L. Thompson of FDIC’s Division of Supervision and Consumer Protection said, “During tough financial times, you may believe you cannot pay your bills and continue to put money into savings.” But there are some simple guidelines that will allow people to weather the storm if and when it breaks out.

The first thing is to have an emergency account for savings. It is to be touched only when something major like loss of job or illness happens. Luke W. Reynolds of Community Affairs Outreach Section of FDIC said, “Emergency savings will help ensure that you don’t have to borrow from your retirement nest egg or take out additional loans that would push you into debt.” The general rule is that this rainy-day fund should be equivalent to two months household expenses. If possible it is best to keep a cushion for six months.

This emergency fund should be kept in a fairly liquid kitty preferably protected by federal deposit insurance and not in stocks or mutual funds that fluctuate with the high and low market tides.

Money should be saved for retirement days. Often the employer gives as much as the employee sets aside for retirement funds. Thus not contributing would be like losing free money as well as invaluable tax breaks.

Each month as soon as the money comes in, instead of spending the first thing would be to put in the stipulated amount into the savings kitty. Arrangements can be made with the bank for automatic transfer to the savings account. It will lead to a sense of satisfaction.

One should start off saving small amounts no amount is too small for a rainy day; even $25 will do. It is the tiny drops that make up the ocean. This will become apparent as soon as one reviews the accounts and see how the tiny seed sprouts into a seed. This will motivate you to do more planting and gardening.

The amount being set aside for debt payment can be put into a separate account that will earn interest. Robert W. Mooney the Deputy Director of Consumer Protection and Community Affairs (FDIC) said, “If you take the loan amount you had been paying and start putting it directly into savings each month, you’ll be earning interest not paying interest and there will be hardly any noticeable change in cash flow.”