4 Crucial Money Lessons It'€™s Never Too Late to Learn
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Just as my freshman homecoming photos from 1997 make me cringe (I rocked a floor-length velvet gown with a feather boa), thinking back on how I used to handle my finances brings on a similar “What was I thinking?” reaction.

Before having my first child at 26, my husband Mike and I weren’t exactly the most financially responsible couple. We lived on the Upper East Side of New York, paying a small fortune for an apartment that was tinier than most dorm rooms. We ate out almost every night, took last-minute vacations and didn’t have much in savings.

Two years—and two kids—later, we were kicking ourselves over how unprepared we’d been for parenthood. Having children highlighted our financial shortcomings in such an urgent way, pushing us into a frantic game of catchup. (For instance, it wasn’t until after I became pregnant that I realized my six-week maternity leave from my then-job as a public school teacher in Brooklyn would be fully unpaid.)

But had we not had kids, it almost certainly would have been something else. What if Mike had lost his job? If we’d had a big medical expense? If our rent had unexpectedly skyrocketed?

Here are four important money lessons I wish I’d learned before my “a-ha” moment forced them upon me, and habits I’ve stuck with every since.

A solid emergency fund cuts down on panic attacks—and debt.

My 6-year-old recently busted her chin open while twirling around the living room with her sister. Even with great health insurance, her six stitches at the ER cost more than $1,000 in out-of-pocket fees.

A few years ago, this would have had me hyperventilating—like that time our dog was rushed to the emergency vet and we had to put the $600 payment on our credit card. (Not surprisingly, a whopping 50 percent of those between 18 and 34 years old say they can’t swing a surprise $2,000 expense, either.)

But now, my rainy-day fund is well-padded because we routinely put a portion of every paycheck into our savings account—no matter what. And thank goodness we do. It allowed us to handle our daughter’s medical bill without breaking a sweat, or reaching for a credit card.

Hands down, the biggest money lesson I’ve learned is that emergencies take all shapes and sizes. Knowing that I’m not at the mercy of an unforeseen bill or an out-of-the-blue repair is empowering, which is why experts typically advise socking away six months’ worth of expenses.

Values-based budgeting is how to get more of what you want.

If you took a peek in my laptop, you’d find a spreadsheet titled “Financial Game Plan.” In it, I’ve got the next three months mapped out—from birthday gifts we’ll need to buy to date nights with Mike. All of our paychecks are accounted for and earmarked for something specific that’s important to us.

Getting this organized took a lot of effort at first—in fact, the idea of laying out all my finances and making a plan was really overwhelming. I’m more of a traditional paper-and-pen type, but it was clear that simply jotting down our bills on a notepad wasn’t going to turn our financial picture around. Since keeping up with my spreadsheet, it’s now second nature.

Simply put, careless spending means less money for the girls. On the flip side, sticking to a budget allows us to splurge on things that really matter, like weekly family brunch dates.

Saving for big purchases over many months is essential (and easier than you might think).

When it comes to making far-away, big-ticket purchases, I’m a firm believer in the envelope system. By squirreling away a little bit of cash—I’m talking $50 a paycheck—over several months, you can have hundreds by the time you need it.

Last June, when summer was just kicking off, I started thinking about—and saving for—Christmas. Fast-forward six months, and Mike and I had $2,000 and the most stress-free holiday season ever, which included Santa leaving Disney World tickets under the tree. For more expensive goals, like bigger family vacations, the same method applies; we just park the cash in our savings account instead of an envelope.

If my approach seems cumbersome, consider setting up an automatic savings plan. Experts say it’s an effortless way to get in the habit of living within your means while simultaneously building your savings.

Prior to using this system, I usually felt blindsided by big purchases. After getting pregnant with our second daughter, for example, we knew we needed a bigger apartment. But instead of making a detailed savings plan, we left it to the last minute, which translated into putting a lot of moving expenses on credit.

Long-term savings equals security.

In what seems like the blink of an eye, our daughters have gone from diaper-clad infants to full-fledged little girls. Experiencing how time flies has forced me to really start thinking about my future. Will Mike and I be able to support ourselves when we’re in our sixties and seventies? The thought of us one day burdening the girls with our care sends me into a panic.

That’s why it’s one of my 2016 goals to fine-tune our long-term savings plan—both within our retirement accounts and the girls’ college funds. I’m currently researching 529 plans and, since I’m now a freelancer, I’m doing my homework to figure out the best approach to retirement savings.

Of course, this need isn’t limited to parents. In a 2012 survey where retirees offered their most valuable advice to younger people, the most common response was very simply: save. More nuanced answers included, “Save for retirement, no matter how little money you think you have,” and “No matter how much you think you should save—double or triple that.” Starting early helps too, thanks to the power of compounding; but the most important step is starting, period.

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