You’ve gotten into the habit of saving money with each paycheck. You may have even gone so far as to set up an automatic savings account. These are wonderful steps to financial freedom.
But is there ever a time when it’s OK to pause savings? Yes. In fact, pausing savings during certain situations is the smart thing to do. Let’s look at when it’s OK to pause savings
An Emergency Strikes
If you’re just starting out, you may not have an emergency account large enough to handle roof repairs, an ER visit, etc. It’s okay to pause savings until you’re able to cover the cost of this situation. Once the cost is covered, however, you need to go back to saving money. More importantly, you need to focus the money saved into building a strong emergency fund so that future emergencies are easier to take care of.
Your Income Is Unreliable
There are many times when your income may be unreliable. A great example is if you’re self-employed. Those that are self-employed often don’t have a clear idea of how much money they’ll make month to month. This makes it hard to save money because you must set money aside for your bills.
What you can do is create a strict budget in which you only pay your bills and necessary expenses and let the excess income build up in your checking account. Once you feel comfortable with how much money you’re making each month, and have a cushion in your bank account, you can start saving money again.
You’re Drowning in Debt
It simply doesn’t make sense to focus your money towards savings when you have several credit cards with a balance. Most credit cards come with high interest rates and many savings accounts have small returns. In other words, you’re losing money by not focusing on your debt before you focus on your savings.
Your Finances Have Changed
There are times when our financial world gets turned upside down. It might be the loss of a job, an illness that prevents us from working, or even a child moving home after experiencing her own financial crisis. Whatever the reason, you need to find a way to bring more resources to the table and this means pausing savings.
You may think that you need to keep your savings account active to be financially successful. However, there are times when it simply doesn’t make sense to keep saving. It might be that your income is unreliable or that you’re drowning in debt. Take a moment to step back and think about if it makes financial sense to continue putting money into savings.
Additional Posts You Might Like: