Americans are saving less than ever before and most people are not saving enough for future needs, whether it is to retire comfortably or fund their children’s college. Many people who are not saving enough have settled into a lifestyle supported by their income levels and spending habits. These habits are difficult to change no matter your income level. Whether you are just getting started or simply want to increase the amount of your savings, I recommend you start with a plan and a few simple strategies.
Make A Plan Studies show people with a plan accumulate twice as much wealth as those without a plan. The motivation of a goal or purpose can help you stay on track when you are tempted to skip a contribution. If you are married, make sure to establish your financial goals and plan together. Many plans fail because the couple cannot agree on key aspects. You may even want to get your teens involved in the planning process since they will need the skills themselves and are a material source of your expenditures.
Start early and let the power of compound earnings grow your next egg. The chart to the right demonstrates the potential impact of starting early.
Pay yourself first by setting up automatic deposit directly from your paycheck into your savings or investment account, before you even touch it.
Start small and stay steady. When you get a raise increase your savings amount or set aside a portion of extra paychecks, bonuses, and tax refunds.
Take advantage of your employer’s retirement plan matching contribution. It’s free money!
Redirect your discretionary spending into savings. Rank the importance of your expenses and reduce or eliminate the items at the bottom of the list.
Put Your Savings to Work for You Don’t let your savings collect dust in a low interest earning savings account or mediocre high cost mutual fund. Take the extra step to establish investing guidelines consistent with your goals and risk attitudes. Monitor your investment performance periodically, make changes when needed, and rebalance your holdings at least once a year to reduce risk.
You can do it! Keep your goals for the future in sight and later you will be rewarded for your discipline now.