How do I save for that?
How often do we say or hear the words “I wish I had the money to…” Today, we live in a ‘spend now and enjoy now’ culture. It may seem boring or countercultural to save money. However, going against the grain and saving money is a wise decision to make. As we’ve seen our world completely upend “normal” day-to-day practices, you never know when you might encounter an unexpected expense or perhaps a job layoff/pay cut where you will need money to sustain your lifestyle. We offer steps for how to save.
Save 3 to 6 months of your bill-paying needs in an emergency fund
In times like these, being out of work can be a difficult strain on the pocketbook. It is important to set up and maintain a 3 to 6 month cash emergency fund that can be used during times of layoff, an unexpected home repair, medical treatment, etc.
When I work with students as part of Junior Achievement, we encourage them to save a little at a time. A few dollars a week or some of your birthday money from relatives can start adding up!
As adults we can use the same logic: Start small and save a specific amount, such as $100 or $500. Once you achieve this goal, it will help you feel accomplished and motivated to keep going to the larger 3 to 6 month emergency fund goal.
It can make you feel more secure to know you have the funds there, should you need them. Once you have an emergency fund set up, the unexpected flat tire or broken toilet will not seem to be as much of a burden because you will be able to use your emergency fund for this type of expense. However, don’t forget to replenish this fund if you begin to use it!
Plan for big purchases
Setting and achieving goals is very rewarding. If you would like to lose 5 pounds, you might begin a workout routine and diet. Once you achieve your goal, you feel empowered and accomplished.
This can also apply to your finances. How to save for a trip to the beach in the summer? Would you like to buy a new car? Plan now and find a way to save on a weekly or monthly basis for this expense. This will help discipline your spending habits and that trip or car will be a great reward once you have saved for it!
You can use mint.com, everydollar.com, or ynab.com to assist you with your budget planning.
Save for retirement now
From a young age, my parents impressed upon me to contribute to my 401(k) as soon as I started receiving a paycheck. “If you don’t see it, you won’t miss it!” was their slogan for wise preparation for the future.
This is a very useful practice. How to save: If out of your first paycheck, you put 3 percent into a retirement account (anyone with documented earnings can contribute to an IRA), then that is money you would get used to not seeing or spending.
Even if you didn’t start off doing this, you can start now by cutting out a cup of coffee a day, limit one day of ordering takeout, or apply your next pay increase to your retirement savings. If you don’t see it in your bank account, then you won’t spend it!
It’s also a good idea to take advantage of company retirement plan matches and maximize the annual retirement plan deposit limits as you are able. There are also options to allow you to periodically contribute through low minimum automatic withdraws from your bank account directly into your IRA account or personal investment account.
To set yourself on a path for savings success, following the steps of saving for emergencies, big purchase goals and regularly contributing to retirement accounts are solid methods. At Domani Wealth, we are here to discuss your financial planning and savings needs. Please contact us to discuss your specific situation.