It’s the new year and we’re all setting goals for ourselves. Personally, I’ve got that one sweet tooth that just won’t let me go without something sugary after dinner and I would love to knock that habit this year! That’s my goal, but I know a lot of friends and clients who are discussing some more serious habits to form this year: saving money.
Though it seems like a pretty simple concept, saving money can be a big challenge, especially for some. According to CNBC, 25% of Americans have zero emergency savings whatsoever, and only half of Americans have 3 months of living expenses stashed in the bank. As we’ve preached in the past, one of the best ways to protect and insulate your long-term financial plan is by having a fully funded “Bucket 1 (emergency fund).” So, if this year is the year for turning your savings around and really making the habit, how can you do it?
- Pay yourself first – One of the best things you can do for yourself the second you receive your paycheck is pay yourself first. Paying yourself first means literally setting money aside in your savings account before you attempt to tackle your expenses for the upcoming month. We oftentimes hear clients say, “I’ll send you whatever money I have leftover at the end of the month for my savings.” Guess what? It usually doesn’t happen. That’s because if you have the cash in your bank account, you’re more likely to spend it. Instead, pay yourself first by immediately moving money over into a savings account, then manage the rest of your budget off what is left over. Which leads me to my next point…
- Live on less than you make – Seemingly simple, surprisingly difficult. By paying yourself first, you’re automatically living on less than you make. If you bring in $5,000 a month, and stash $500 of it into a savings account, you’ve already set yourself up for success by living off the remaining $4,500. If you’re already accustomed to a certain lifestyle and spending 100% of what you bring in each month, it’ll certainly be more difficult to backtrack and cut back on expenses. In that case, the best thing you can do is…
- Start small – Sometimes, we can be so worried about creating BHAGs (big, hairy, audacious goals) that it becomes overwhelming. If you’re just starting to save and really trying to cut back to fund that emergency fund, don’t stress yourself out and expect to have it funded overnight. Take baby steps by maybe setting aside a few dollars each time you get paid and cutting out a couple of small expenses you don’t need to have to live. Couple this with a longer-term goal of having your emergency fund established within a certain amount of time and you should be able to knock it out!
Saving, and establishing the habit of saving, is an important one. It’s a habit we can set for ourselves now, that can have generational impact. These decisions can make a lasting impact on our children’s and grandchildren’s lives. By teaching ourselves to save, we not only set ourselves up for financial success, but we ultimately can set up future generations for that same success.
Let us know how our team can help make this possible for you. That’s what we’re here for and why we love what we do!