In today’s fast-paced world, it’s easy to get caught up in the daily grind and neglect our financial well-being. However, by taking a few simple steps, you can break free from financial stress and build a brighter financial future. As you may know, many Americans are not saving enough money for the future, with a significant portion of us (as high as sixty percent) living paycheck to paycheck with little to no savings. After reading this article, you will have a better grasp on how to save for your future. You may find that it is not complicated and anyone with the right time and focus can do it. Following is my three-step process to save more of your hard-earned money.
Creating a budget is the first step towards saving money for the future. To create a budget, first track your income (what goes into your bank account) and expenses (what goes out of your bank account) for a month to understand exactly where your money is all going (banks have this online now in their tools section), categorize your expenses into necessary and discretionary (needs and wants) spending, and debt repayment (car payment, mortgage payment, credit card payments, etc.). After tracking your income and expenses, the next steps include setting financial goals and priorities, assigning percentages, and then monitoring and adjusting your plan.
After tracking your income and expenses, set your financial goals, such as saving for an emergency fund, retirement, or a specific expense, and then allocate specific amounts of your income into these categories based on your goals and priorities. Your end goal will be 60% of spending is going to your needs, 20% to your wants, and 20% to your goals. By following these steps, you can create a budget that helps manage your finances effectively and achieve your long-term financial goals.
After your budget is established, you may be thinking about different ways to effectively and reliably save 20% of your income. Fortunately for you, there are many easy and adjustable methods to save consistently and automatically, thus protecting you from forgetting to save. The savings should go to fund another account such as a savings account, a retirement plan, an investment account, or the like in order to get it out of your spending account. The amount you transfer can be set as a fixed or as a scaling amount.
My quick guide to automating your savings goes like this: Step 1 – see how much you can afford to save (see budget above). Step 2 – identify which accounts to establish and save to. Step 3 – assign dollar amounts, frequency, and schedule. Step 4 – monitor and adjust savings. After that, take advantage of employer matching to finalize your saving strategy.
The final step is taking advantage of employer matching. Your retirement savings plan at work (if you have one) is an option to automatically save for your future. While this is an option, it should be considered the first option once your emergency fund is properly established. The reason being is the IRS provides tax incentives for employers to help their employees with their retirement savings in the form of a match and/or a profit share. This is literally free money – but you can’t get it unless you contribute to your own account first.
Here is the quick guide to getting the “free money” through your workplace retirement savings plan: Step 1 – see how much you can afford or desire to save. Step 2 – ensure the amount will give you 100% of the free money. Step 3 – enroll/adjust saving from your paycheck (HR/company website). Step 4 – monitor and adjust paycheck savings.
As you can see, there are a lot of moving parts in saving money for the future. It may seem overwhelming at first. Just remember, it is a process, and it will take some time to get used to it, at first. Your budget is the foundation of your personal financial renaissance. There are several free online budget software systems publicly available, but if you still feel like you would work better with a team, contact me with no obligation at (346) 763-3531 or email me at john@safeguardfinsvs.com. Based in Houston, TX, I am an independent financial advisor working with trucking companies, their owners, and employees – and I can help you, too! I would love to help you get where you need to be!