If you’re like most people, you get paid, send out all your bills, and allocate some funds to entertainment, clothing, food for the household, and some gas for your car. What’s left over? A couple of bucks for a coffee during the week? Saving a little bit of your paycheck every week before you allocate out all your expenditures is a wise move to make. Why? Saving just $25 from your paycheck each week will give you $1,300 a year. Up it to $50 and you’ll save $2,600.
Make a Goal
PBS.org says it doesn’t matter what amount you choosethe key is to do it automatically. Don’t just assume you’ll have money left over at the end of the month. You won’t unless you make it happen. Treat your savings account as a key expense and allocate money to that first before you do anything else. A goal of 10 to 15 percent of your income will put you on a solid track for the future.
Can’t save that much?
Go with five percent, two percent, even $20 – whatever you can pull off, do it. If your payroll department offers a direct deposit into your savings automatically at payday, take advantage of it.
Trimming the fat is an essential part of making a commitment to your savings plan. We all want our indulgences, so if yours is a daily coffee, go for it. If it’s the movies every weekend with friends, great. If it’s new shoes, so be it. But you have to narrow down your choices so that it’s not all three all the time. Choose one thing you want to splurge on and forget the rest.
We’ve all heard the financial gurus telling us how much we can save if we just forgo the morning latte. But there’s truth to that statement, so the next time you want to shell out $5 for that tall triple soy latte on your way to work each morning, consider that you could put that money in the bank and save $1,825.
Savings Outlook Among Americans
Surprisingly only half of Americans have a savings plan, with 51 percent saying they had one and 49 percent saying they did not. Age was a factor in those research findings. About 33 percent of those between the ages of 18 and 24 had a savings plan, with the highest group being 25- to 34-year-olds at 57 percent. Even more surprising was the lowest groupthose aged 45-54 yearsonly hovering around the 50 percent mark, a time when saving for retirement should be priority number one.
Creating a Cushion
Why have savings? Well, unlike your 401(k) and kids’ college funds, a simple savings plan helps you sock away money in the event of an emergency. Perhaps your car died and you need to shell out big bucks to get it fixed. Maybe you just got laid off and need some cash to live on till you find a new job. God forbid you to end up in the hospital and can’t work to pay the bills. Maybe it’s just the fact that your son really, really, really wants to go to that expensive baseball camp for the summer. Whatever it is, make sure you have the fluid cash to devote to it.
Bankrate suggests saving $100 or 10 percent from every paycheck so you can build up a nice nest egg at the end of the year. Experts recommend an emergency fund of between three and nine months’ worth of expenses. Families with kids and lots of expenses will need the max amount, while seniors with lots of income sources, such as social security and very few bills, can make do with the minimum. Whatever amount you can swing, make sure it’s something you sock away and don’t touch unless it’s truly needed.