Are You Saving for the Future?
People often come to us looking for financial guidance. Some want to know how to invest or diversify the money they’ve saved, while others admit they’re just not sure how to save in the first place.
If you’ve been meaning to save more for the future but aren’t sure how to begin, don’t panic. You’re in good company. Many Americans, even those in higher income brackets, live paycheck to paycheck with little or nothing put away for emergencies or retirement. But here’s some good news.
There are many ways to start saving, even if you start small, that can increase your net worth without significantly altering your current quality of life.
In general, when it comes to a lack of savings, the issue is often not low income but high spending. While it’s true that circumstances such as job loss, health care bills, and home repairs can force us to spend more than expected, excessive spending can also become a habit we need to learn to break or at least control.
But where do we begin?
Many people would like to reduce their spending and increase their savings, but it seems like such a monumental task that they simply give up without taking any steps in the right direction. Sound familiar? If so, don't shrug it off any longer. Saving money can begin right now; you just need to know a few “secrets.”
Secret #1: Put It Aside
- When you’re considering a large purchase, like a car, or even a small one, like a pair of designer shoes, try putting the decision aside for a week or two. Give yourself time to think it through. If you still feel it’s a good idea after that time, proceed knowing it’s not just an impulse buy. If not, walk away.
- Most of us have made at least one purchase we later regretted. What if you could put that money back into your pocket instead? What if it were earning interest in a savings account? Those small decisions could really add up.
Secret #2: Pay Yourself First
- When you receive a paycheck, you likely pay your mortgage or rent first, your car payment second, your insurance third, and so on. Somewhere near the bottom of the list is you. Why? Probably because you know you won't penalize yourself if you skip a payment to yourself.
- Hold yourself accountable. Start by putting money into your savings account first. Make saving a priority so there are no excuses at the end of the month. Unless your monthly bills exceed your monthly income, you should be able to determine a set, comfortable amount to put into savings every month.
Secret #3: Shop Smarter
- We’re all in a hurry, so it’s easy to grab snacks or coffee when it’s convenient. But if you stop at a convenience store for a 12-ounce coffee every morning, you’re probably spending at least $2 a day, and that adds up.
- How much could you save by making your own coffee? And what could those savings become over time? For example, saving $600 per year in an account earning a hypothetical 5% annual return could grow to more than $30,000 over 30 years, depending on compounding, taxes, and account terms. Two dollars a day adds up to more than $700 a year.
- Start paying attention to those “little” expenditures. They can really add up!
Secret #4: See Your Destination
- They say hindsight is 20/20. Consider this: if you had started saving just $200 per month 10 years ago, you would have $24,000 today, even without earning interest. Unfortunately, we can’t go back in time, but we can look ahead.
- Use a financial calculator (there are free calculators available online) and start plugging in numbers. Calculate where you could be in 20 or 30 years, depending on how much you’re willing to save today. Once you see what you could achieve, saving money might become your favorite pastime: a competition with yourself to see how much you can increase your future net worth. Have fun with it!
Secret #5: Ditch the Shoebox
- Speaking of that hypothetical shoebox under your bed, the money in it might collect dust, but it won’t collect interest. While we doubt you’re actually keeping your savings in a shoebox, take a moment to consider where and how you’re saving your money.
- A traditional savings account can earn interest, but other options may offer different benefits. Perhaps you’ve heard people talk about money market accounts or certificates of deposit (CDs), but you’re not sure what they are or whether they’re right for you. It’s worth learning about your options so you can make informed decisions about your money.
The best guidance we can offer: speak with a financial professional. While saving money is important, where and how you choose to hold and grow those savings can significantly affect your net worth in the years to come.
We’d be happy to sit down with you for a complimentary visit to discuss your financial situation. Please reach out if you have questions or something on your mind. And if you don’t speak with us, we encourage you to speak with another qualified professional.
After all, it’s not just about what we make. It’s about what we save and how we save it. Make a plan for your future today.