Written by guest contributor, Megan Pacheco
Saving for the future is hard. That’s why so few of us actually do it. The future, after all, seems so distant and we tend to think there will always be more time.
If asked about the importance of having a nest egg, most of us would shout a loud AMEN! Yet when it comes to practicing the habit of saving, a large majority would not get a passing grade.
In 2014 the average savings rate among Americans was a dismal 4.8%. A generation ago, the savings rate was 7%-10%, and two generations ago it was between 10%-13%. Instead of making progress, we seem to be on a steep decline.
It’s scary to think that 26% of adults have absolutely no savings at all, and only 24% of us have enough emergency savings to cover three months of expenses. To sum it up, most of us live paycheck-to-paycheck, crossing our fingers and hoping that financial emergencies will bypass us all together. We are completely unprepared for possible job loss, health emergency or soon approaching retirement.
Spring and Easter represent hope, and hope is a great thing. Yet I’ll be the first one to tell you that hope alone is never a good financial strategy. If you want to get serious about your future, if having a solid financial nest egg is important to you, and if you want to stop worrying about the “what ifs” of life, than here are a few simple steps you can take in order to turn your wishful thinking into reality:
1. Make savings your top budget priority
You’ll never become a saver unless you make it a priority in your day-to-day finances. Instead of saving your “leftovers,” decide to save a specific percentage first, and only then allocate what’s left to the remaining budget categories – or debt!
Depending on your financial situation you may have to start small, but don’t let that discourage you. The amount does not matter as long as you start and stay consistent. As you start setting funds aside, don’t do what most children do with their Easter candy – devouring them shortly after collecting them in their baskets. Instead, make a commitment not to tap into your savings unless it’s truly an emergency.
2. Put your savings on autopilot
For many of us, saving money after it’s been deposited into our account is tough. Natural spending instincts kick in and we are often left with nothing but good intentions. To protect yourself from spending those funds that should be allocated to savings, put your savings on autopilot by asking your employer to direct deposit a certain amount from every paycheck into a separate bank account. Out of sight out of mind may be what you need in order to kick starts your savings.
Did you know that depositing only $50 every two weeks would allow you to save $1200 over the course of a year? It may not seem like much, but over time this amount will accumulate to a nice sum of funds available to you in case of a financial emergency.
3. Set clear goals
In order to stick with any habit we need a compelling reason why, as well as clear, achievable goals. If you want to develop a habit of saving money, determine your specific goals first, and then decide what adjustments are needed in your day-to-day finances in order to hit those goals in a specific time frame.
If you have no financial safeguard, saving 3 months of your living expenses may be your first goal.
How about saving for a car replacement so that you can eliminate those high car payments and finally create a margin in your budget?
Retiring mortgage free, or having a specific amount set aside for your retirement years should be a part of your long-term savings plan. Taking advantage of your employer’s 401k match or investing a portion of your income in a Traditional or Roth IRA should not be overlooked or delayed. The number of elderly Americans in the workforce is on the rise, about to hit 30%, and many who are in their 60’s and 70’s have no other option but to work at least part time in order to make it to the end of the month. If you don’t want that to be you, then long-term savings strategy is a must.
By now I think you’ll agree that hope alone makes for a poor financial strategy. Hope and optimism, combined with a financial discipline to save a portion of your income can become a winning strategy for you and your family. Here is to building your own nest egg and being prepared for whatever lies ahead!
Comment below and tell us your own “Savings Hacks” and ways you find room to put money away for a rainy day. Also, build your savings plan on Mvelopes and accelerate your debt roll-out and savings rates!
[button link=”http://bit.ly/1O7kbFl” type=”big”] Build a FREE Savings Plan[/button]