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 out small, that can increase your net worth without significantly altering your current quality of life.
The Real Issue: Spending, Not Earning
In general, when it comes to a lack of savings, it’s often not a question of low income, but rather a matter of high spending. While it’s true that we’re sometimes forced into situations where we must spend money—due to job loss, healthcare bills, home repairs, and so on—many of us have developed excessive spending habits that we must learn to break or at least control.
But where do you begin? Many people want to reduce their spending and increase their savings, but it seems like such a monumental task that they simply give up and don’t take 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 it aside for a week or two. Allow yourself time to think it through. If, after that time, you still feel it’s a good idea, proceed knowing it’s not just an impulse buy. If not, don’t. Most of us have made purchases we later regretted. What if you had the money back for every such purchase? What if that money was collecting interest in your savings account? It could really add up.
Secret #2: Pay Yourself First
When you get a paycheck, you likely pay your mortgage or rent first, your car payment second, your insurance third, and so on. Somewhere at the very bottom of your list is you. Why are you at the bottom? Probably because you know you won’t penalize yourself if you don’t make a payment to you. Hold yourself accountable. Start by putting money into your savings account first. Take care of yourself before anyone else, so there are no excuses at the end of the month. Unless your monthly bills are higher than your monthly income, you should be able to determine a set, comfortable amount that goes into savings every month.
Secret #3: Shop Smarter
We’re all in a hurry, so it’s easy to grab items like snacks or coffee when convenient. But if you stop at a convenience store for a 12 oz. coffee every morning, that’s at least $2.00 you’re spending every day, and that adds up. How much money could you save by making your own coffee? If you saved just $600 per year in a basic savings account with a 5% rate of return, after 30 years, you could potentially have more than $30,000, and that’s after taxes. Start paying more attention to those “little” expenditures. They can really add up!
Secret #4: See Your Destination
They say hindsight is 20/20. Think about this: if 10 years ago you began saving just $200 per month in a shoebox under your bed, today that shoebox would have $24,000 in it! Unfortunately, you can’t go back in time. But you can look ahead. Use a financial calculator (there are free ones available online) and start plugging in numbers; calculate where you could be in 20-30 years, depending on how much you’re willing to save today. Once you see what you can achieve, saving money could become your favorite pastime. Make it 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 that box might collect dust, but it won’t collect interest. And while I doubt you actually keep money in a shoebox, take a moment to consider where and how you save your money. While a traditional savings account can earn you interest, there are other options available that could potentially earn you more. Perhaps you’ve heard people speak about money market accounts or CDs, but you’re not sure what they are or if they’re right for you. It’s a good idea to learn all you can and make informed decisions about your money.
The Best Guidance: Speak to a Professional
While saving money is important, where and how you choose to retain and grow that money can significantly impact your net worth in the years to come. The best guidance I can give you is to speak with a financial professional. I’d be happy to sit down with you for a complimentary visit to discuss your financial situation. If you don’t speak with me, I’d encourage you to consult with another qualified professional.
After all, it’s not about what we make, it’s about what we save and how we save it. Make a plan for your future today.
Ready to Schedule a Meeting?
Click here or the photo below to schedule an in-person, virtual, or phone call meeting.
We look forward to working with you!
