Welcome to AMAGOLDD's Blog: Finance

Showing posts with label Finance. Show all posts

Friday, 18 August 2017

Coordinating Family Finances

08:44:00

To live a happy and peaceful life with financial freedom, it's very important to manage family finances properly. Failing to manage spending or agree on financial decisions can cause a married couple to fall into endless arguing. To get through the many financial decisions present in married life, you have to coordinate a budget and financial planning with the whole family and keep an open dialogue going about the family's money.

Talk openly about your finances. While this is important all the way through life, it is especially important to establish financial honestly before you get married. If one partner has a poor credit history or large debts that are not brought up before marriage, it can lead to resentment and problems down the road. Before getting married, you should meet with your loved one and discuss his current financial situation, including how much he makes, where that money goes, his credit history, and any large debts he is carrying. This sets the tone for financial openness in the rest of your lives together.

Meet regularly to talk about money. Decide on a time of the month to get together specifically to discuss your finances. Perhaps this meeting can coincide with the arrival of the monthly bank statement or the due date of monthly bills. In any case, use your time at this meeting to assess the previous month's expenditures, mark your progress towards long-term goals, and to propose any changes or major purchases that you want to make. Only by talking about money regularly can you make doing so a comfortable and productive experience.

Don't make one person the sole manager of the family's money. Many families choose to allow one person to take charge of all the family's finances; however, this places an unnecessary burden on that person and leads to others' being unaware of the family's current financial situation. In addition, if that person leaves through death or divorce, it leaves the others completely unaware of how to manage or even access the family's finances. Solve this problem by splitting up tasks between you or by managing finances in alternating months.

Both you and your spouse should attend any meetings with financial professionals, such as those with a loan officer or investment advisor.

Decide on an account setup. Families have options when it comes to setting up joint accounts. Some choose to keep everything together while others keep their finances mostly separate. At minimum, you should have a joint account to pay for household expenses and your mortgage payment. At the end of the month, you can split these expenses in half and each transfer in an equal amount of money into this account to pay these expenses. Having separate account can prevent arguments that might arise from one person's spending habits.

Just make sure to set limits to how much money each of you can spend each month so that one person doesn't end up spending all of the family's money.

Build up individual credit. Even though your finances will be combined, it is still important for each of you to have a strong credit score. Doing so will ensure not only that your credit will be good when you apply for credit jointly, but also that your credit history will remain intact if you split up. A simple way to manage this is by having separate credit cards, each established only in the name of the spouse who uses it.

Thursday, 16 March 2017

Cultivating Good Spending Habits

00:35:00

Saving money and sticking to a budget are always a challenge. There are so many opportunities to spend money without thinking, and so many of life's obligations and opportunities require a chunk of your finances. How do you cultivate the spending and lifestyle habits to avoid losing money?

Do not buy things just because they are expensive. In marketing they call this a surrogate indicator – it is the idea that because something is expensive it is of higher quality. This often has no bearing on the reality of the product. Many times a product is simply expensive because people are willing to pay a lot of money for it – not because the product is of high quality.

Value your money. Many people lose money simply because they do not value it. You are very easily going to give up that which you do not value and money is no exception to that rule. Many people think that having no money is a noble thing but there is no nobility in poverty alone and it is definitely not a noble thing to lose all of your money simply because you do not value it.

Don’t spend more than you earn. This is the key to financial stability. The moment you start spending more than you earn is the moment you begin to become financially complacent. Such a habit can be difficult to recover from.

Budget your money. Budgeting is a tried and tested way to remain on to of your finances and stop yourself from losing out. There are numerous ways to budget your money and many of them are on this website.

Budget your time. Your time is more precious than money therefore it is imperative that you budget it well. Budget your week, your days, even Look at where you have five minutes, ten minutes, half an hour to spare, what habits and routines can you place in these times that will benefit you in the long run?

Sunday, 15 January 2017

Understanding Your Saving and Investment Options

09:00:00

You are never too young to start saving and investing. People that start investing when they are young are more likely to develop habits that will last a lifetime. The earlier you start investing, the more money you’ll accumulate over time. To find additional dollars to invest, you might start your own business. Everyone can find money to invest if they analyze and change their spending habits.

Use a savings account or buy a certificate of deposit. A savings account gives you access to your money at any time with very low risk. This option, however, offers a low interest rate on your investment. A certificate of deposit (CD) offers a slightly better return, but with less flexibility. You must leave the money with the bank for a period of time ranging from months to years.

These investments have several benefits. They are easy to set up, and they're typically insured by a government agency, meaning they're very safe.
The downside is that these investments pay very little interest. Without much interest, you don’t generate as much compounded interest. As a result, CDs and savings accounts are suitable only for holding small amounts of money for very short periods of time. They may improve as savings vehicles in times of high interest rates.
Smaller banks and credit unions will sometimes offer higher interest rates in order to attract customers away from larger institutions.

Invest in government or municipal bonds. When you buy bonds, you are loaning money to a government or municipality. You can also invest in bonds issued by corporations.

Bonds pay a fixed rate of interest on your investment each year. You can reinvest your interest in more bonds and allow compounding work for you.
Payment of your original investment (principal) and your interest is based on the credit rating of the issuer. Government bonds and municipal bonds are often guaranteed by tax dollars that the issuer collects, so risk is low.
A corporate bond’s payments are based on the creditworthiness of the corporation. A company that generates consistent earnings will have a better credit rating.
You can buy bonds through your bank, or using a financial advisor.
There is a downside to bonds investing. When interest rates are low, returns can be small. Even in times of higher rates, bonds usually offer lower returns than stocks. Bonds, however, are normally considered less risky than stocks.
The average return on bonds since 1928 (including compounding) is 6.7% per year, compared to 10% for stocks.

Buy stocks. When you buy stocks, you are a company owner. Stock investors are also referred to as equity investors. Investors buy stocks to earn dividends and to benefit from an increase in the stock’s price.

Stocks offer better returns on average than most other types of investments. While stocks offer higher returns, they also involve more risk. The longer you are able to invest in stocks, the more time you have to recover from a stock price decrease.
If the company generates earnings, they may elect to pay a share of those earnings as a dividend to stockholders.
You can purchase stocks by opening a brokerage account. You’ll be asked to complete a new account form. Once your account is open, you can deposit funds and purchase stock. Consider using a financial advisor to invest in stocks.

Invest in a mutual fund. A mutual fund is a pool of money contributed by many investors. The funds are invested in securities, such as bonds or stocks. The mutual fund portfolio can generate bond interest or stock dividend income. Fund investors may also benefit if a security is sold for a gain.

Mutual fund accounts are easy to open and maintain. Investors pay fees to the fund for money management. You can add to your investment regularly and reinvest your earnings, if you choose.
Funds allow you to invest in a variety of stocks and bonds. This provides the safety of diversity, protecting you against losing money when just a few securities decline in value.
Most mutual funds allow you to invest with a small initial amount and to add small, periodic investments. If you don't have much to invest, this will be important. Some funds allow you to begin with as little as $1,000 and add in increments of as little as $50 or $100.

Friday, 11 November 2016

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07:45:00

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Thursday, 10 November 2016

Preparing Yourself To Invest

07:06:00

FLICKR

Ensure investing is right for you. Investing in the stock market involves risk, and this includes the risk of permanently losing money. Before investing, always ensure you have your basic financial needs taken care of in the event of a job loss or catastrophic event.

Make sure you have 3 to 6 months of your income readily available in a savings account. This ensures that if you quickly need money, you will not need to rely on selling your stocks. Even relatively "safe" stocks can fluctuate dramatically over time, and there is always a probability your stock could be below what you bought it for when you need cash.
Ensure your insurance needs are met. Before allocating a portion of your monthly income to investing, make sure you own proper insurance on your assets, as well as on your health.
Remember to never depend on investment money to cover any catastrophic event, as investments do fluctuate over time. For example, if your savings were invested in the stock market in 2008, and you also needed to spend 6 months off work due to an illness, you would have been forced to sell your stocks at a potential 50% loss due to the market crash at the time. By having proper savings and insurance, your basic needs are always covered regardless of stock market volatility.

Choose the appropriate type of account. Depending on your investment needs, there are several different types of accounts you may want to consider opening. Each of these accounts represents a vehicle in which to hold your investments.

A taxable account refers to an account in which all investment income earned within the account is taxed in the year it was received. Therefore, if you received any interest or dividend payments, or if you sell the stock for a profit, you will need to pay the appropriate taxes. As well, money is available without penalty in these accounts, as opposed to investments in tax deferred accounts.
A traditional Individual Retirement Account (IRA) allows for tax-deductible contributions but limits how much you can contribute. An IRA doesn't allow you to withdraw funds until you reach retirement age (unless you're willing to pay a penalty). You would be required to start withdrawing funds by age 70. Those withdrawals will be taxed. The benefit to the IRA is that all investments in the account can grow and compound tax free. If, for example, you have $1000 invested in a stock, and receive a 5% ($50 per year) in dividends, that $50 can be reinvested in full, rather than less due to taxes. This means the next year, you will earn 5% on $1050. The trade-off is less access to money due to the penalty for early withdrawal.
Roth Individual Retirement Accounts do not allow for tax-deductible contributions but do allow for tax-free withdrawals in retirement. Roth IRAs do not require you to make withdrawals by a certain age, making them a good way to transfer wealth to heirs.
Any of these can be effective vehicles for investing. Spend some time learning more about your options before making a decision.

Implement dollar cost averaging. While this may sound complex, dollar cost averaging simply refers to the fact that -- by investing the same amount each month -- your average purchase price will reflect the average share price over time. Dollar cost averaging reduces risk due to the fact that by investing small sums on regular intervals, you reduce your odds of accidentally investing before a large downturn. It is a main reason why you should set up a regular schedule of monthly investing. In addition, it can also work to reduce costs, since when shares drop, your same monthly investment will purchase more of the lower cost shares.

When you invest money in a stock, you purchase shares for a particular price. If you can spend $500 per month, and the stock you like costs $5 per share, you can afford 100 shares.
By putting a fixed amount of money into a stock each month ($500 for example), you can lower the price you pay for your shares, and thereby make more money when the stock goes up, due to a lower cost.
This occurs because when the price of the shares drops, your monthly $500 will be able to purchase more shares, and when the price rises, your monthly $500 will purchase less. The end result is your average purchase price will lower over time.
It is important to note that the opposite is also true -- if shares are constantly rising, your regular contribution will buy fewer and fewer shares, raising your average purchase price over time. However, your shares will also be raising in price so you will still profit. The key is to have a disciplined approach of investing at regular intervals, regardless of price, and avoid "timing the market".
At the same time, your frequent, smaller contributions ensure that no relatively large sum is invested before a market downturn, thereby reducing risk.

Explore compounding. Compounding is an essential concept in investing, and refers to a stock (or any asset) generating earnings based on its reinvested earnings.

This is best explained through an example. Assume you invest $1000 in a stock in one year, and that stock pays a dividend of 5% each year. At the end of year one, you will have $1050. In year two, the stock will pay the same 5%, but now the 5% will be based on the $1050 you have. As a result, you will receive $52.50 in dividends, as opposed to $50 in the first year.
Over time, this can produce huge growth. If you simply let that $1000 sit in account earning a 5% dividend, over 40 years, it would be worth over $7000 in 40 years. If you contribute an additional $1000 each year, it would be worth $133,000 in 40 years. If you started contributing $500 per month in year two, it would be worth nearly $800,000 after 40 years.
Keep in mind since this is an example, we assumed the value of the stock and the dividend stayed constant. In reality, it would likely increase or decrease which could result in substantially more or less money after 40 years.

Monday, 7 November 2016

How to Be Financially Disciplined

07:42:00

Do you want to do a better job of saving money while enjoying a bit of entertainment, too? This article features a simple way to save, enjoy and not have to worry all the time about money. Read on to find help in being financially disciplined.

Organize all your financial documents. Create a file folder or a cabinet or box with sections for all your expenses, insurance, assets, income and liabilities. You could label the folders this way:

House/apartment
Income
Insurance
Medical
Vehicle
Utilities
Taxes

In each folder put everything associated with the category. For example, under "house/apartment" you would keep mortgage or lease/rent documents. Under "utilities" you'd file gas/electricity, water, sewage, tv/internet, and phone bills. Note everything you spend on entertainment, groceries, and gas.

Determine how much you spend in each category. Some expenses are unavoidable, such as mortgage/rent and utilities. However, you could reduce your monthly expenses in other categories by first determining how much you spend there and how much is absolutely necessary.

Create a balance sheet with all your income in one column and all your expenses in another. Do this for at least three months to determine a pattern. By doing this you get an idea of how often you eat out and how much you spend on movies or other entertainment. You'll begin to see where you might be able to reduce costs.

Set goals. Write down everything you want to accomplish. Include estimates of how much your goals will cost and how long before you achieve them. For example:

"Buy a house: $200,000 with a 5% down payment. Save $10,000 by June 2020."
This will give you an idea of how much you need to save to reach your goals.

Once you've identified your goals, determine which are short-range goals (within five years), and determine how much you will need to put aside every month to reach them. Let’s say you want to buy a $30,000 car. You can take out a loan for $30,000 that you will need to pay back in three years. You will have monthly costs (not taking interest into account) of approximately $833.

Save as much as possible for a down payment. This will reduce the amount of the loan and the interest you'll pay on it. Be realistic in setting money aside, because you'll have to continue meeting your living expenses.

Ask your payroll department to deposit a certain amount from your paychecks into whatever retirement account your employer offers. By paying yourself first in this way, you can save money for retirement without even seeing it (and being tempted to spend it). Spend only a part of what's left in each paycheck. Try to save as much of what remains as you can. You may find it hard to maximize your savings, but as you near retirement, you will be very glad you did.

Deposit some money into a savings account for emergency purposes. Try to maintain an emergency fund consisting of roughly six months' worth of normal expenses. This will help cover costs should you lose your job or become temporarily incapacitated.

Find ways to reduce costs. Using a budget will help. Here are some examples:

Watch matinee movies instead of higher-priced evening showings.
Eat out once or twice a month rather than once or twice a week.
Make your own coffee and take it to work or school rather than stopping by a coffee stand on your way.
Leave your credit cards home when going shopping. If you're determined to use a card, pick one with a generous rewards program.
Don’t go grocery shopping when you're hungry. You may buy more than you need at such times.

Tuesday, 1 November 2016

Becoming A Budget Professional

07:39:00

FLICKR

A budget could help you crush your outstanding debt, take charge of your financial future and even become a happier, more relaxed person. Depending on your circumstances, a proper budget may not require that you spend less. Instead, you may simply have to make more effective financial decisions.

Stick to your budget and don’t overspend. This is the first rule of budgeting, and pretty much the only one. It sounds fairly obvious, but it's easy to go over budget, even when you have one in place. Be mindful of your spending habits and what your money is going towards.

Try to reduce your expenses. Larger expenses can be the most unpleasant but most effective ways to stay within a budget. If you take an annual vacation, consider staying home this year. Smaller expenses can also add up.

Try to identify and cut back on any expensive luxuries you enjoy. If you enjoy a weekly massage or have a preference for expensive wine, cut down on the frequency of these treats so you’re spending money on them only once a month or once every second month.
Save money on smaller expenses by switching to generic brands and eating home more often. Try not to go out to eat more than one or two times every week.
See if you can reduce any of your fixed expenses by switching to a less expensive cell phone plan, reducing your television package, or improving your home’s energy efficiency.

Treat yourself periodically, but within reason. Your money has to work for you, not the other way around. You don’t want to feel like a slave to your budget, or to money in general, so it’s important to allow yourself a small treat every month that won’t break your budget.

Don't abuse your own rewards system to the point where it gets counterproductive and ends up affecting your budget. The idea is to treat yourself to smaller, cheaper items like a latte or a new shirt and to avoid splurging on more expensive items like a vacation or a pricey pair of shoes.

Pay off credit card balances every month. If you use credit cards, you should try to keep them at a zero balance every month to avoid costly fees. If you cannot pay off the current balances, prioritize paying them off within a reasonable time period so that you can get to zero balances.

Try switching to cash payments for most weekly purchases—particularly “extras” like eating out or coffee shop lattes. This can help you control your spending, as people are more aware of the money they’re spending when using cash than when swiping a card.

Cut your taxes. Take better advantage of itemized deductions when you file your taxes every year.

Start keeping your receipts, especially if you're an independent contractor and work from home or remotely. There are many amenities you can expense as part of your contract work when doing your taxes.
It’s a good idea to research ways to get a better tax refund as a contractor or ask your accountant how you can get a better refund.

Appeal your home assessment. If you're a homeowner and have sufficient evidence, you might be able to cut your real estate taxes by challenging the value that a home assessor puts on your property.

Don't count on windfalls. Don't factor in potential (unsure) sources of revenue, such as year-end bonuses, inheritances, or tax refunds. You only want to include guaranteed money in your budget.

Tuesday, 25 October 2016

How to Develop Financial Literacy

08:02:00

It is never too early, or too late, to begin developing financial literacy, taking control of your finances, and putting yourself on the path to financial security. Being financially literate allows one to earn more, spend less, and get the things he or she really wants. To develop financial literacy at any age, follow these steps.

Become familiar with your household finances. Know how much money you have coming in, how much goes out, and where it goes. There are several things that you can do to familiarize yourself with your finances:

Review your bank statements. Find out how much of your money goes into the bank and for what, other than your monthly bills, it comes out.
Go through your monthly bills. You should know exactly whom you pay each month, for what, and how much you pay them.
Scrutinize your credit card statements. Learn how much you pay on your cards each month, what your total balance is, and how you use your cards.
Track your loans. Know how much you owe and how long it will take to pay if off making the regular monthly payment each month.
Review investment account statements. Find out where your money is invested, and how much that investment is earning you each year.
Obtain a copy of your credit report and read it. You are entitled to one free copy each year from each of the three credit reporting agencies. To get your free copy online now, visit http://www.annualcreditreport.com.

Set a financial goal. Financial responsibility is easier when you are working towards a goal. Decide to remodel the bathroom, purchase a new vehicle, or upgrade your television set. It does not matter what your goal is, just that it is something you want for which you will have to save.

Develop a budget and stick to it. Once you know how much money you have coming in and going out, and you have a financial goal, you will need to develop a budget that allows you to save towards your goal. To develop a budget that you can stick with:

Keep a record of your monthly spending for several months. Include groceries, gasoline, clothing, lunches and dinners out, dry cleaning, school expenses, etc. You want to be sure that your record is an accurate picture of how you spend your money.
Write a spending plan using your spending record as a guide, eliminating unnecessary expenses, and decreasing those, which may be too high.
Revise your budget as necessary. When monthly bills change or are eliminated, your financial goals become different, or your income increases or decreases, a change in the budget is necessary. Your budget must be flexible in order for you to stick with it.

Discuss finances openly and honestly, and stay involved. Generally, one spouse is in charge of the finances, but that is no excuse for the other to not know where the money goes, and be involved in financial decisions. You do not have to know where every dime your spouse spends goes, nor does he or she need to know where every dime you spend goes, but you should both be aware of your financial situation and be involved in the big financial decisions.

Learn the difference between good debt and bad debt. Not all debt is created equal. Here is how to tell the good debt from the bad debt:

Debt, which creates value and helps you to build wealth is good debt. The most common example of good debt is a mortgage. The value of the home increases as the amount of the debt decreases and you build equity in the home. School loans are also considered good debt because of the potential value of a degree you earn acquiring the debt.
Debt, which continues to increase, as the item purchased with it decreases, is bad debt. Credit cards are the number one bad debt among consumers. The items purchased on the card decrease in value, while the interest you are charged on them increases each month you do not pay off the credit card. Car loans are also bad debt because the value of the car decreases more quickly than the principle of the loan.

Avoid common money management mistakes. There should be more money coming in than there is going out. Oftentimes, simple things people do or do not do, throws that balance out of whack without them realizing it.

Living on credit. Charging merchandise to credit cards or taking out loans to purchase large ticket items is not living within your means. If you are not living within your means, you are incurring bad debt, which may dig you into a financial hole, of which you cannot get out.
Not setting financial goals. It may not sound like a huge mistake to not have a financial goal, but if you have no real reason to manage your money well, you are not as likely to do it. A financial goal will give you something to look forward to and work towards.
Calling luxuries items necessities.

Educate yourself on personal finance. Look for organizations in your community that can help you learn more about personal finance, with articles, activities, and classes.

Places to check for information include banks or credit union, nonprofit housing organizations, employee assistance programs, and religious organizations.
You may also want to check with your local college or university to see if they offer personal finance or economic classes you can take.

Learn how to identify unreliable sources of information. Even when using information found on the internet, the same basic rules apply.

Reliable sources of information include colleges and universities, federal and state governments, well known national organizations, such as the National Cancer Society, and articles published in professional journals and peer-reviewed publications. Many reliable websites end in .gov, .org, or .edu. This generally indicates that the site is a government entity, non-profit organization, or educational institution.
Unreliable sources of information most often come from self-published mediums, such as blogs, personal websites, social networking sites, internet forums, and unknown organizations. As a general rule, if a well-known expert did not write it or a well-known entity publish it, it is unreliable information.

Pass on the knowledge. There is always more to learn in the way of personal finance, so learn with your children to pass the knowledge on to the next generation. The Federal Reserve is a great place to start for ways to learn more as you teach your children. It even offers games and simulations for children; to get them started learning about personal finance early. Visit the website at
www.creditcards.com
And
http://www.federalreserveeducation.org

Monday, 5 September 2016

Focusing On The Future As An Investor

06:59:00

Be patient. The number-one obstacle that prevents investors from seeing the huge effects of compounding mentioned earlier is lack of patience. Indeed, it is difficult to watch a small balance grow slowly and, in some instances, lose money in the short term.

Try to remind yourself that you are playing a long game. The lack of immediate, large profits should not be taken as a sign of failure. For example, if you a purchase a stock, you can expect to see it fluctuate between profit and loss. Often, a stock will fall before it rises. Remember that you are buying a piece of a concrete business, and in the same way you would not be discouraged if the value of a gas station you owned declined over the course of a week or a month, you should not be discouraged if the value of your stock fluctuates. Focus on the companies earnings over time to gauge its success or failure, and the stock will follow.

Keep up the pace. Concentrate on the pace of your contributions. Stick to the amount and frequency you decided upon earlier, and let your investment build up slowly.

You should relish low prices! Dollar-cost-averaging into the market is a tried and true strategy for generating wealth over the long run. Furthermore, the less expensive the stock prices are today, the more upside you can expect tomorrow.

Stay informed and look ahead. In this day and age, with technology that can provide you with the information you seek in an instant, it is tough to look several years to the future while monitoring your investment balances. Those that do, however, will slowly build their snowball until it builds up speed and helps them achieve their financial goals.

Stay the course. The second biggest obstacle to achieving compounding is the temptation to change your strategy by chasing fast returns from investments with recent big gains or selling investments with recent losses. That's actually the opposite of what most really successful investors do.

In other words, don’t chase returns. Investments that are experiencing very high returns can just as quickly turn around and go down. "Chasing returns" can often be a disaster. Stick to your original strategy, assuming it was well thought out to begin with.
Stay put and don’t repeatedly enter and exit the market. History shows that being out of the market on the four or five biggest up-days in each calendar year can be the difference between making and losing money. You won't recognize those days until they've already passed.
Avoid timing the market. For example, you may be tempted to sell when you feel the market may decline, or avoid investing because you feel the economy is in a recession. Research has proven the most effective approach is to simply invest at a steady pace and use the dollar cost averaging strategy discussed above.
Studies have found that people who simply dollar cost average and stay invested do far better then people who try to time the market, invest a lump sum every year on new years, or who avoid stocks.

Wednesday, 17 August 2016

6 Ways To Spend Money Intelligently

09:12:00

It is one thing to have money it is another thing to have the knowledge of spending it. Here are hints on how to spend money wisely;

Spend money on absolute essentials first. When it comes to spending money, there are some things that you absolutely, positively cannot do without. These things (namely, food, water, housing, and clothing) are your first priority when it comes to spending your cash. Obviously, if you become homeless or suffer from starvation, it becomes very, very difficult to meet the rest of your financial goals, so you'll want to ensure that you have enough money to cover these bare minimum requirements before devoting money to anything else.

However, just because things like food, water, and shelter are important doesn't necessarily mean that you have to splurge on them. For instance, cutting down on the amount that you go out to eat is one easy way to drastically reduce your food expenses. Along the same lines, moving to an area with cheap rent or home prices is a great way to spend less on housing.
Depending on where you live, housing costs can eat up a large chunk of your income. In general, most experts recommend against agreeing to any housing arrangement that will cost more than one-third of your income.

Next, save for an emergency fund. If you don't already have an emergency fund with enough money in it so that you can survive if you suddenly lose your income, begin contributing to one immediately. Having a reasonable amount of money stockpiled in a secure savings account gives you the freedom to comfortably sort out your affairs in the event that you lose your job. After you cover your essentials, you'll want to devote a chunk of your income to building up this savings account until you have enough saved to cover about 3-6 months of living expenses.

Note that living expenses can vary based on the local financial climate. While it's possible to survive on $1,500 for a few months in Detroit or Phoenix, this might not even pay one month's rent for a cheap apartment in New York City. If you live in an expensive area, your emergency fund will naturally need to bigger.
Besides giving you the peace of mind of knowing that you'll be OK in the event of career difficulties, having an emergency fund can also earn you money in the long run. If you lose your job and you don't have an emergency fund, you may be forced to take the very first job you're offered, even if it doesn't pay well. On the other hand, if you can survive without working for a while, you can afford to be much pickier and potentially land a better-paying job.

Next, pay off your debt. Left unchecked, debt can seriously derail your efforts to save money. If you're only making the minimum payments on your debt, you'll end up paying much more over the life of the loan than if you had paid it off more quickly. Save money in the long-term by devoting a good chunk of your income to debt payment so that you can pay off your debt as quickly as possible. As a general rule, paying off your highest-interest loans first is the most effective use of your money.

Once you've covered your essentials and built up a reasonable-sized emergency fund, you can safely devote almost all of your extra income to paying off your debt. On the other hand, if you don't have an emergency fund, you may have to split your extra income up so that you use a portion to pay off your debt each month while simultaneously diverting some into your emergency fund.
If you have multiple sources of debt that are proving overwhelming, look into consolidating your debts. It may be possible to roll all of your debts into one loan with a lower interest rate. It's important to note, however, that the repayment schedules for these consolidated loans can be longer than those for your initial debt.
You may also want to try negotiating with your lender directly for a lower interest rate. It's not in your lender's best interest to let you go into bankruptcy, so s/he may agree to a lower interest rate in order to allow you to pay off the loan.
For more information, see How to Get Out of Debt.

Put away money next. If you've established an emergency fund and paid off all (or nearly all) of your debt, you'll probably want to start putting your extra money in a savings account. The money you save this way is different from your emergency fund — whereas you'll want to avoid dipping into your emergency fund unless you absolutely have to, your normal savings are available for big, important purchases, like repairs to the car you use to drive to work. However, in general, you'll want to avoid using your savings so that, over time, your total savings grow. If you can, try to devote at least 10 -15% of your monthly income to your savings starting in your 20s — most experts agree that this is a healthy goal.

When you get paid, it can be tempting to immediately make an impulse buy. To avoid this, deposit your savings into an account as soon as you get paid. For instance, if you're trying to save 10% of your income and you get a paycheck for $710.68, immediately deposit 10% (find this by moving the decimal point one space to the left), or $71.07. This practice can help you avoid unnecessary spending and accumulate a good amount of money over the years.
An even better idea is to automate as much of the saving process as possible so that you don't even have the tempting money to begin with. For instance, talk to your employer about setting up an automatic deposit system through your bank or with a third-party app. This way, you can transfer a set amount or percentage of each paycheck to a checking or savings account without having to make any extra effort.

Next, spend on smart non-essentials. If, after adding a healthy amount of your income to your savings each month, you have extra money left over, you should consider making certain non-essential investments that can improve your productivity, earning potential, and quality of life in the long run. While these types of purchases aren't essential in the way that food, water, and housing are, they are smart long-term choices that can end up saving you money over time.

For example, buying an ergonomic chair to sit in while you work isn't absolutely essential, but it is a smart long-term choice because it allows you to do more work while minimizing back pain (which, coincidentally, can be expensive to treat if it develops into a serious problem). Another example is replacing your home's old, troublesome water heater. While the old one may have sufficed in the short term, buying a new one means you won't have to spend money on repairs when the old one breaks, saving money in the long run.
Other examples include purchases that allow you to get to work for cheaper, like monthly or yearly public transit passes, tools that help you work more effectively, like a phone headset if you're in a job that occupies your hands, and purchases that make it easier for you to work, like posture-improving gel inserts for your shoes.

Spend on luxuries last. Saving money isn't all about living hard and lean. When you've paid off your debt, established an emergency fund, and spent money on smart purchases that pay off in the long term, it's OK to spend a little money on yourself. Healthy, responsible luxury spending is one way to stay sane while working hard, so don't be afraid to celebrate getting your financial situation in order with a reasonable luxury purchase.

Luxuries include anything that's not an essential good or service and provides little or no long-term benefit. This broad category can include things like trips to expensive restaurants, vacations, new vehicles, cable television, pricey gadgets, and much more.

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