Friedrich Nietzsche said, “For a tree to become tall it must grow tough roots among the rocks.” This global pandemic that we are in the middle of is certainly a rocky time! What are the roots you should be working on right now?
I always recommend starting with a cash reserve.
Large expenses seem to come in threes. If you need a major car repair, the dishwasher is bound to break soon followed by a crown at the dentist. Worse yet, what if you are being impacted financially by Covid? To grow a deep root, keep three to six months’ worth of expenses in your cash reserve. Not exactly sure what your expenses are? It doesn’t need to be that complex. Simply look at your bank statement from last month. What was your income? How much did you pay out? What’s left? If you didn’t save it, you spent it. That is your monthly expenses. This past year, I saw many of my clients increasing their cash reserve so that they were not only ready for their own personal needs but also so they may be able to help a family member if the need arose. Where are you with your cash reserve?
Another root is living within your means.
Have your expenses gotten away from you? Are credit cards starting to creep up? This can be a dangerous game and can cause serious root rot. Take a look at your credit card debt. Write it all down on one page and also write down not only the interest rates but also the actual dollar amount you are paying each month in interest. Become aware of your debt. When you stop ignoring it and face the reality, you make changes. Get out of debt as quickly as possible to protect your roots!
Save for your future out of every paycheck.
When is the best time to start saving for retirement? Right now! Life has certainly changed during the pandemic. This past year, we saw a number of early retirements – people who decided that it while they could keep working, it just wasn’t worth it to them. Do you know how deep this root needs to be? What is your number and how far off are you? Are you saving anything today? If the answer is no, start off small. Put 1% of your paycheck away – preferably through a 401k from your employer or other retirement plan. Then, each time you get a raise, increase your savings amount by one third of your raise. For example, if you get a 3% raise, increase your savings from 1% to 2%. If you get a 6% raise, increase your savings from 1% to 3%. You won’t feel the impact in your cash flow and your savings will increase gradually over time to keep pace with your lifestyle.
A tree does not grow deep roots overnight. It takes time. Start today with small steps and in no time, you’ll be able to weather the storm. Need some fertilizer? We are here to help.