
What is the purpose?
We have to have a reason for setting aside a portion of our hard earned money rather than spending it as we please. The goal is to start saving for large expenses and building reserves for unanticipated situations. Retirement, education, vehicles and a home are some of those large expenses that can usually be anticipated well before incurring the cost. And it takes time to save enough to be able to afford these items, even when using a loan to do so. Cars breaking down, medical emergencies and loss of employment can crop up in an instant and wipe you out financially if you are not prepared.
How much should you pay yourself?
So this all begs the question of how much money to set aside. The true response would be that you should set aside as much as you are comfortably able to. Set aside as much as possible while still being able to cover your other expenses (and still being able to treat yourself every now and again).

Where you put the money that you save is another beast all together. There are a variety of savings vehicles that will help put your money to work for you. You can look forward to some future posts that address this. For now just make sure that the savings are put somewhere that is a little more difficult to access. Even a simple barrier to access can be effective, i.e. putting it into a savings account instead of checking.
It is best to have at least 6 - 12 months worth of living expenses set aside as cash savings. This can be at the bank and does not have to be rolled up and hidden inside your mattress. It just needs to be easily accessible, or what is known as a liquid asset.
After you have enough funds set aside to cover emergency living expenses, the money you continue to set aside each month can go into other types of saving vehicles. CD's, bonds, 401K's, real estate... there are a lot of places where this money can be saved and put to work earning you more money. As I said before, there are too many to be covered in this article. Know that you just need to keep setting money aside to be there for emergencies and to prepare for big expenses and retirement.
Start right now. Go into your bank's mobile app and transfer $100 from checking into savings. Go ahead, I'll wait.
Great! Don't you feel better already? Keep it up and your money will be able to take on whatever comes your way.