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Savings Is the Key to Debt-free Living
Most debt that overwhelms household finances typically results from three primary situations:
- Job loss or household income reduction
- Overspending on consumer expenses, and
- Excessive medical bills
Divorce, addictions, and lawsuits also find their way onto many lists of the top reasons for consumer debt.
Because an ounce of prevention is worth a pound of cure when it comes to debt, we prioritize savings above all other topics in this course. Sufficient savings will…
- minimize the possibility of incurring future debt
- prepare you for expensive medical issues
- secure your finances in times of unemployment
Cultivating a mindset around savings can also move you away from mindless spending (i.e. impulse) and toward purposeful money decisions.
Save for Emergencies
If you’re not sure what emergency savings funds are for, remember this:
The purpose of an emergency savings fund is this: to make up for lost income.
- Job loss
- Temporary income reduction
- Self-employment income troughs
Short-term Savings Goals
Additionally, households should consider saving for future non-emergencies, such as:
- Vacations
- Birthday and Christmas gifts
- Vehicle repair and replacement
- Appliance and furniture repair and replacement
- Future splurges and impulses
For more information, check out Money Fit’s ultimate savings guide here.
