1. “Rainy Day” Money

First things first - Open up an Online Savings Account

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This is your “Rainy Day” savings for when bad things happen like unplanned car repairs, you need to buy a new water heater for your home, your furnace breaks, you lose your job and need to continue to pay the bills for a few months, etc. This is NOT an account to be used for “fun” stuff like a new computer, dinner and a movie, etc.

The minimum to open up one of these accounts is $1.00. Then, setup an automatic monthly deposit and feel your security grow. Increase your monthly deposit annually or as you earn more money.

Here’s how to do it:

  1. Browse over to http://www.hsbcdirect.com/ or http://www.emigrantdirect.com/ and open up an online savings account currently (2007) returning 5.05%. Can’t make a decision? Close your eyes and start clicking in this general area of the page. Hopefully you’ll click on one of the two links I just listed. If not, open your eyes and pick one of them. Just get going!!
  2. Do NOT pick the option that you want an ATM card. This account will be for deposits only for the majority of its life. We don’t want to be withdrawing money using an ATM card. Why? Because it happens all the time. You’re out on a Friday night and you’re short of funds to enjoy a few hours of fun. So, you decide to use your ATM card and withdraw funds from your “Rainy Day” account. Do this for a few Friday nights and see what’s left over when you really need it.
  3. Link it to your bank checking account so you can setup a monthly deposit from your checking account into this account. The point is to make the deposit automatic so it happens monthly. If you don’t make it automatic, most likely it won’t happen. Check your bank to make sure no fees are incurred at either end of the transfer.
  4. Check your balance quarterly.

This is your emergency fund or “stash”. Try and get it to grow to that standard we always here about, 3-6 months of your income or ask yourself, “what would it take to cover 3-6 months worth of my expenses if I was out of work”.

With consistent automatic deposits over a long period of time, you will reach your savings goal.

Here’s a link for the day: http://www.stopbuyingcrap.com/

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