Close your eyes and imagine yourself with a $1000 in a savings account. What if you had no other debt other than your house? Now add 3 to 6 months of income to that savings account. Think this is impossible? It isn’t, it is just not normal. A recent Harris poll showed that 1 out of 3 Americans age 18 to 33 do NOT have a personal savings. Oh, and 53% have zero for retirement. If you want to be different then start saving. If you want to make better decisions, then start saving. That’s right, you will make better choices if you are not in debt and have 3 to 6 months of savings piled up. So maybe we lack the statistical data to back this up, but follow me for a second.
Couple A has no savings and a few thousand in credit card debt, along with two student loan payments and two car payments. Oh, and they have a mortgage and some medical bills from the birth of their first child.
Couple B has 3 to 6 months of savings and only a mortgage.
Even writing Couple B’s scenario was less complicated. However, Couple B did not just end up in this position they made some difficult choices to pay down these debts that Couple A has and started to save.
Now let’s look at how each couple may come to a decision based on what we know.
Questions:
Can we afford a babysitter?
What if a car breaks down?
What if I loathe my job?
What if one gets laid off?
What about retirement savings?
You see no matter the situation you would much rather be in Couple B’s position. Your choices my not be any easier than if you were Couple A but how much better will your decisions be?
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