FAMILY MATTERS

Do you have any suggestions that would help us do a better job of saving money for future needs? We live day to day and never seem to be able to set money aside for those “emergencies” that always seem to arise.

Because families live on the edge financially, lack of savings is one of the most common problems noted in our counseling. See if you can relate to any of the following situations:

The transmission on your car wears out and you don't have the $1,500 needed to have it replaced. A child has to be hospitalized unexpectedly for a few days and even though your health insurance covers most of it, the $1,000 co-pay requirement is too much for your checkbook. Your 15-year-old washer finally breaks down but you can't afford to pay cash for a new one.

In each of these situations, the family thinks of these expenditures as surprises and never sets aside the money to pay for them ahead of time. Unfortunately, most will pay for these with their credit cards, beginning a cycle of increasing debt and financial bondage.

In reality, we know that things like this are going to happen at some point and we should plan appropriately. By learning to save a portion of your resources to cover these and other future costs, you'll go a long way toward staying out of financial bondage and remaining debt free.

The first step to take in order to be able to save is to make the decision to live within your means. The Catechism reminds us that “our thirst for another's goods is immense, infinite, never quenched” (No. 2536). It's this insatiable appetite for things that makes it so difficult to save for a rainy day. We would do well to heed the advice given in Proverbs 6:6-8, which says: “Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer or ruler, she prepares her food in summer, and gathers her sustenance in harvest.” Do you see how the ant prepares for the future by setting aside a portion of the resources it gathers today? We should do the same.

Your next step in developing a savings plan is to create a realistic budget with savings as a planned “expense.” Families would do well to target at least 10% of gross income as an appropriate amount to save. Once you have completed your budget, you'll need a system so that the money actually gets set aside. Just as you pay your regular bills, you'll want to “pay” your savings bill.

Here are a couple of suggestions. If your employer's payroll system allows for direct deposit to your bank, have your budgeted amount deposited directly to your savings account. If your employer doesn't offer direct deposit, just determine the amount that should be credited to savings from every paycheck and split the deposit between your checking and savings accounts.

Remember that it won't do any good to set the money aside into your savings account if you're not following your budget. You'll just find yourself continually “robbing Peter to pay Paul” as you dip into your savings account to cover regular expenses. Instead, track your actual expenses and periodically compare to your budget to ensure that you are following your plan.

God love you!

Phil Lenahan is author of The Catholic Answers Guide to Family Finances.