Saving for your future is vital, but unfortunately most Americans do not treat it as such. If you are ready to buckle down and get serious about saving money, these are some common mistakes folks often make:
Budget for Savings – Most people would find it unthinkable to miss a mortgage payment or a utility bill or even credit card payments. Missing a month of putting money into savings doesn’t seem like a big deal. It’s time to change that thinking. Savings for big goals (like retirement) should be considered a “must-pay” just like your rent.
Too Little Savings – It’s important to save at least 15% of your income. Longer lifespans, rising healthcare costs, higher taxes and lower expected returns make it important that you set aside enough to ensure your retirement is comfortable. Also, savings for other items like an Emergency Fund and other goals. Your emergency fund should have enough money to cover 3 – 6 months of household expenses in case of unexpected job loss, medical or other costs.
Automate Your Savings – You should have automatic deductions from your income to your retirement account or savings accounts. Automating the savings makes sure the money gets to were it needs to be before you have a chance to do something else with it.
Keep Your Savings in Separate Accounts – Don’t try to save your money in your checking account. Open a separate savings account for your Emergency Fund. Don’t open an account with debit card access…make it a little difficult to get the money if needed. Retirement money should be in a 401k or IRA. Other goals (Vacation fund, house down payment, etc) should also have their own dedicated accounts.
Set Clear Goals – Have clear measurable goals. When you have hard numbers for savings goals -- with dates in mind to achieve those objectives -- you can track your efforts, ensure you're on track, and stay excited about saving.
Stop making these errors and supercharge your savings and you’ll get used to improving your savings rate in not time! If you are interested in speaking to a financial coach, call VetAdvisor today!