Tips for Successful Personal Finances
One thing I’ve learned over the years is not to have my savings account linked to my debit / ATM card. If I want to make an impulse purchase, I have to put some thought into it and move money either online or at the bank. This delay gives me time to talk myself out of wasting my savings on something I don’t really need.
An added benefit to keeping your accounts separate, is that if your debit card is stolen, the thief cannot access the money in your savings.
Have you struggled to save money because there never seems to be anything left over? Big surprise! We tend to spend the money we have in front of us. Getting a raise never seems to help, because that money disappears, too. There’s always something we think we need right now.
The best way to grow the money in your savings account is by setting up an automatic deposit from your paycheck. That way you never see it to spend it. If your company doesn’t offer this, that’s not a problem. Have an amount set up to be transferred automatically from your checking account to savings on a regular basis. The benefits here are that you are saving without any effort on your part and the money isn’t in your checking account to tempt you.
Making payments towards retirement doesn’t have to be difficult. Remember what you’re saving money for. You want to retire some day, so you can enjoy some golf and vacations when you get older without having to work.
There are few ways to fund your accounts. If you receive large bonuses, you could simply deposit them into your IRA or 401K and just live within your regular paycheck. That won’t be possible for everyone. Most of us calculate the amount to pay by dividing our maximum contribution amount by the number of pay periods per year. Basically, we’re taking the money out of our paychecks.
The key is to act like it’s not yours to spend. This is your fun money, so you can take the grandkids to Disneyworld and finally take the European cruise, without having to worry about where you’re going to live or how.
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The Biggest Savings
In honor of Financial Literacy Month, I want to show you the biggest savings we’ve come across in our family. Any guesses?
It’s lunch! We used to eat out for lunch every day. Who has time to make lunch before work, right? But we gradually learned that we could save a lot of cash for things we really want if we could just get used to bringing our own food.
Lunch shouldn’t cost that much. It’s not dinner at a nice restaurant – it’s a sandwich at the cafeteria or a McD’s. But, it does add up. Let’s say you spend $10 a day for food at work or school, combining lunch, a vending machine snack, and coffee, bottled water or pop. It’s just a few little items throughout the day, but let me show you the numbers.
And that’s for one person. If there are two of you in the household, then you can double the numbers. I bet you can find something better to do with $5,000 or $10,000 a year.
I used to have all the excuses – not enough time to make my lunch, it’s too boring, etc. Well times have changed.
Part of that change was accepting that we like different types of lunch foods. He’s a sandwich person and makes his lunch the night before. Sandwiches keep well in the fridge overnight. That doesn’t work for me. I like leftovers, soups and salads. I might make extra for dinner so I can have leftovers for lunch the next day. Or, make soup on a Sunday, then have soup for a few days. I like combining my leftovers with salad greens to make a fancy salad. My lunches need to be freshly made in the morning. Because I have the ingredients, and a plan, it takes less than 5 minutes.
What about beverages? My husband is a coffee drinker. He makes his coffee the night before with a programmable coffee pot. The money savings made the pot a really good investment. I’m a water drinker, so I use a washable metal water bottle. I just refill and put it back in the fridge when I get home from work, so it’s ready to go in the morning.
Just by taking these little steps, we are able to save money and use it for other purposes. How about you? Are you ready to try bringing your lunch to work? What system would work for you?
Opening your own IRA is a great idea, but do your research first.
Make a few appointments to interview banks and investment companies. What are their fees? What types of investments do they offer? There are many options to choose from.
If your company doesn’t have a retirement plan, then you should start an IRA or a ROTH IRA.
Talk with your investment person or tax preparer to determine what is best for you. Discuss the income limits and the maximum contribution amounts you can contribute based on your age. Have this discussion today.
I can hear you saying… “I don’t have enough money to live today, so how can I think about saving for retirement?” Yes, that might be true, but look at it another way… you will get older and you will want to retire some day. If you don’t start now you’ll have to work the rest of your life.
If you work for a company that offers a 401K or 403B, take advantage of it. If your company offers you matching funds and you haven’t taken advantage of it, then you are turning down FREE money. As an added benefit, the money you contribute is tax free today, and any growth in your account is not taxed until you withdraw it.
Talk to your company benefits person and start an account as soon as possible. If you need to wait for open enrollment, mark that date in your calendar.
If you already have a retirement savings with your company, increase the amount you contribute so you’ll have more later when you really need it.
Emergency savings are for when your car breaks down. It’s for an unexpected medical expenses. It’s for covering your bills if you’re between jobs. It’s for unexpected home repairs. An emergency is something that must be taken care of right now or you won’t be able to get to work, have a place to live, or when you might have to choose between medical bills and utilities.
What it’s not: a savings account for things you think you need. No matter how much you think need to book a cruise, a nice vacation is a want. You will survive if you vacation at home with trips to the local beach. You will also survive without a smart phone, or cable TV, or a Kindle. You get the idea.
Once you have an emergency savings equal to one year of your expenses (yes, I said one year), then you can start saving for the fun things you want in life. Today, plan on how you are going to start saving for emergencies. Set up a regular savings amount from your pay that automatically goes to this account.
Whatever your goals are, you have to learn to live within your means. That means that you cannot spend more than you earn. For every dollar you bring in, you need to spend less than a dollar so that the remaining amount can be saved.
Go back to the numbers you did earlier this month. Are you including money for savings? If not, you need to figure a way to do that. In a perfect world, you need to have savings for emergencies, savings for retirement and savings for wants. Today, think about how you will get that money to save.
It’s Day 20 of Financial Literacy Month – time to make a list of things you really want. Maybe it’s money to pay for your children’s college? Maybe it’s more money to save for retirement? Maybe it’s enough money to be able to live monthly and not worry about how to pay your bills? Whatever you want, today is the day to make a list and meditate on your goals.