Tuesday, January 26, 2010
Downsizing debt and strengthening savings for financial fitness
Focusing on debt reduction is the number one goal for more than 75% of respondents to a survey administered by the National Foundation for Credit Counseling (NFCC). But those who aren't equally as focused on creating a savings cushion could be setting themselves up for a financial fall.
Racking up credit card debt, sometimes on higher-interest-rate cards, and using up money earmarked for necessities like mortgage payments and utilities are just two examples of what can happen when an emergency arises for the ill-prepared.
NFCC recommends setting aside 10% of each payment in an emergency savings account. For those whose budgets seem to lack room for more savings, try this exercise: for one month, categorize all your expenditures. Doing so will help you identify where you can cut back and free up cash for that important rainy day fund.