People who develop a savings plan are twice as successful at saving as those who don’t. There are tons of ways to save for those working with any budget. Here are some ways that you can begin to develop a savings plan that’s right for you.
Most financial institutions (Vantage West included) offer savings accounts that give you the option to transfer money into them automatically. What you don’t see in your paycheck, you probably won’t miss. These automatically transferred payments add up quickly, and can help fund school tuition, down payment on a home loan, or even retirement.
Save for emergencies
Having an emergency savings is the most important difference in people who manage to stay afloat and those who sink financially. Six in 10 Americans don’t have $500 in savings. Without the cushion of an emergency fund, you may feel the need to turn to high-interest credit cards or expensive payday loans. Plan for unexpected expenses with at least a $500 emergency fund. Financial advisors would recommend having three months’ worth of expenses in a savings account so you’ll have enough money to get by if you lose your job or get sick.
Pay off high-interest debt
The best investment you can make is to get out of excessive debt. Even a small amount of credit card debt with 15-19% interest can turn into an extremely long payoff period and huge interest charges. Think about it – the only way to truly grow your money is to have full control of all of it. Another tip on credit card usage is to avoid using credit cards for small or expendable purchases. Including interest in large purchases such as computers or furniture can make sense, but when you end up paying 15-25% interest on a night dining out, the total cost becomes much less justifiable.
“One of the first steps in climbing out of debt,” says NerdWallet columnist Liz Weston, “is to give yourself a way not to go further into debt.”
Save for retirement
A person rarely becomes rich off of wages alone. Wealth is built over time with compound interest from investments. The longer your money works for you, the better your potential returns. The easiest way to grow your nest egg is to start today. Here is a table that shows how much easier it is to start saving for retirement when you start earlier versus later in life.
These are results from saving $475 per month1 and earning an annualized return of 8%.
|Starting Age||Nest egg at age 67|
No matter the size of your monthly contribution, starting early allows your investments to do the work for you. Contributing to retirement accounts also reduces your income taxes, because those contributions are not counted in your income. Employers often have matching contribution plans to a retirement. Any way you look at it, the sooner you start saving and investing, the less you have to work today to secure your financial future.
1 This is an example of a mathematical concept. The assumed 8 percent return is hypothetical.