September 28, 2020
Our Managing Attorney, Matt Herron, had the opportunity to discuss his thoughts on financial distress due to the COVID P...Read More >
Saving money should be a financial priority for everyone. It’s the simplest way to build wealth. Money in the bank accrues interest, generating more wealth over time. This will help you navigate any financial issue, emergency, and retirement.
However, the undeniable fact is that just setting some money aside is not enough to assure a comfortable financial future. According to Teresa Ghilarducci, an economics professor at the New School for Social Research, about 75% of Americans preparing to retire in 2010 had less than $30,000 saved. More people need to realize that you only have a limited time to save for retirement. If you don’t start saving from a young age, there are consequences.
It might seem like common sense, but saving can be difficult. The following tips will help you save and build your wealth more effectively:
This might seem obvious, but debt can hurt your ability to save. The interest accruing on your debt can easily outweigh the interest you gain from your savings. This is particularly troublesome when it comes to unsecured debt of $10,000 or more. Pay down your debt before attempting to build up your savings in earnest. Once you’ve addressed your standing debt, avoid incurring large credit card or further unsecured debt payments. If your debt is holding you back from saving, it may be time to look into bankruptcy.
Keep a Budget
Keep a budget so you can better manage the ebb and flow of the economy. Include expenses for any dependents, transportation, insurance, housing, personal wellness, recreation, taxes, and any other regular costs you incur. If you can fit savings or investments into your budget, be sure to weigh your options. For example, this USA Today piece shows that a seemingly safe investment option could cost you.
Set Your Goals
Set realistic savings goals that you can confidently fit into your budget. Whether you’re setting aside $50 or $100 per month, or setting up a direct deduction from your paycheck to your retirement, these goals will help you save responsibly. You’ll be able to cover your bills and necessities, and your savings and retirement accounts will become more robust.
On the other hand, there are ways you can spend money that are beneficial in the long run. The idea is not to spend for the sake of spending — it’s to treat your spending like an investment. Ask yourself: would this investment add value to my life? Will it help me earn more money in the future?
Consider spending money on a new suit for meetings or interviews. Look into conferences or seminars where you can learn new skills and trends pertinent to your work. Your employer might be willing to reimburse you for costs associated with such professional development. Attendance at these events also broadens your professional network and reflects well on you when it comes time for a raise.
…But Be Responsible
As tempting as it may be to spend money on an enticing investment or a once-in-a-lifetime experience, try to take a step back and survey your financial situation before jumping in. If an investment would put you in a precarious situation, try setting a goal similar to your savings. When you reach the goal, make the investment without fear. For example, for every $10,000 you save, you could invest $1,000 in stocks, mutual funds, or a CD.
However you choose to invest that money, try to do so conservatively. Protecting your investment should be your first priority. Safe investments will help you do just that. Aim to have at least half your portfolio in blue chip stocks to ensure you aren’t putting too much money at risk. These big-name, sure-thing investments will offer some protection while you explore other investment opportunities.
What if the financial landscape you are surveying is overgrown with debt? In most cases, time and consistency will help you build a healthy financial situation in which you can budget, save, and invest more freely. If this does not help, then bankruptcy could be a useful tool that can eliminate costly monthly payments and restructure your budget so you can save and have a healthy financial situation. If you endlessly struggle with debt with no end in sight, you are wasting time and money that could be used to save for a house, college or retirement. If you are having trouble saving, call us. We can create a plan that will help you eliminate debt and start saving.