Saving money is about more than putting aside funds for a rainy day, or for retirement at some point down the road. Rather, it’s a way of thinking and living that can help finance your dreams, enable you to reach short- and long-term life goals, and provide financial freedom.
A well-thought-out financial plan that includes smart saving strategies makes it possible for you to live the way you envision, such as having the discretionary income to enjoy hobbies, buy your dream home or even retire early and travel the world. Here are some financial tips to inspire your own path for a savings plan.
Compounding interest. This is a powerful process that, if you take advantage of early (ideally in your twenties), can help skyrocket your savings potential over your lifetime. With it, you earn interest on your interest—a process that multiplies, or compounds, over time. You can take advantage of compounding interest through financial vehicles like interest-bearing savings accounts, individual investment accounts, individual retirement accounts (Roth or Traditional) or 401(k) plans.
Covering the basics. Knowing you are covered for all your personal necessities, such as food, shelter and clothing can offer comfort. Aim to always have a surplus of funds in your checking account to cover day-to-day transactions and avoid costly overdraft fees.
Conquering the unexpected. Life happens. When something out of the ordinary occurs, it will likely go more smoothly if you have prepared in advance. An emergency fund that is easily accessible at a moment’s notice—consisting of three to six months of expenses—will help you when you need it most.
Saving for the future. Yes, I’m talking about saving for your retirement, but also for the goals and needs that arise before you retire. As Americans are living longer, healthier lives, you may actually be retired for more years than you worked to acquire the assets. In reality, you could potentially need money for several decades after you retire. As a general rule, do your best to save at least 10 to 15 percent of your post-tax income each year. It takes planning to find the balance between saving for short-term needs, mid-term goals and long-term goals, but it’s worth it.
It’s easy to focus solely on what’s in front of you, but the sooner you consider the bigger picture, and master the art of smart saving, the better off you will be in the long run. Plus, by establishing a solid financial foundation, you will have more options for making memories and reaching achievements that are most meaningful to you.
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Lisa Taranto Schiffer
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