| How important is saving money? Saving money is | | | | In order to truly become financially free, you will have |
| vitally important. In fact, it is one of the single most | | | | to start saving at some point in your life. Ideally, you |
| important steps to achieving most of your financial | | | | should start in your twenties. Understandably, income |
| goals in life and becoming financially free. The sooner | | | | level at that age will not be as much as someone in |
| you begin to save the better of you will be later on. | | | | their fifties. The key is to simply start where you are. |
| Having a savings in place can also serve as a form of | | | | As time progresses, your income level will increase in |
| protection during a financial crisis. A financial crisis could | | | | direct proportion to your experience and educational |
| include any of the following: | | | | advancement. This means that your ability to save |
| • Job Loss | | | | more will increase as well. It is recommended that you |
| • Unexpected expenses (i.e. auto repair or medical | | | | start out saving 10 percent of your after tax income. |
| expense) | | | | As you get raises and bonuses, if you stick to the |
| • Death of a family member | | | | same 10 percent savings, over time, your savings level |
| At the core of building adequate savings is debt | | | | will grow and grow. |
| avoidance. A savings serves as your cash reserve or | | | | There are several benefits of starting to save at an |
| safety net when you need it. The key is to have it in | | | | earlier age. However, the primary reason is that you |
| place before the need arises. | | | | have time on your side. The sooner you begin, the |
| How Much Should You Save | | | | more you will be able to accumulate over time. This |
| The rule of thumb is to save a minimum of 10 percent | | | | protects you when emergencies arise. By building your |
| of your take home pay in addition to your retirement | | | | savings now, you will have a larger nest egg available |
| planning contributions. By doing this on a regular basis, | | | | when you need it. |
| you become used to it and accustomed to living below | | | | There are three primary factors that determine your |
| your means. If you are able to save more then 10 | | | | savings accumulation levels: |
| percent, you should do so. | | | | 1. The amount you save. |
| It is also recommended that you have 3 to 6 months | | | | 2. The interest rate of return. |
| worth of expenses saved up as your emergency | | | | 3. The length of time you save. |
| fund. This amount includes all expenses, fixed and | | | | Time is what can work for, or against, you. Therefore, |
| unfixed. For example, if in January you spent a | | | | the sooner you start, the better. |
| combined total of $2900 on your mortgage, car note, | | | | Tips on Saving |
| utilities, insurance, food, credit card bill, and other | | | | Growing your savings can take time; therefore start |
| expenses, then you would need to multiply $2,900 x 3 | | | | as early as possible. The amount doesn’t |
| at the minimum. This means you should have between | | | | matter in the beginning. Just start some place and be |
| $8,700 and $17,400 saved up for emergencies. | | | | consistent. Condition yourself into not missing or |
| Unfortunately, the sad reality is that many people live | | | | needing that amount. Over time, your savings will grow |
| paycheck to paycheck with little or no savings. This is | | | | due to your diligence. Here are some tips on saving to |
| not good. You should work to build your reserve as | | | | get you started: |
| fast as possible. | | | | • Save a minimum of 10 percent of all after tax |
| Automate Your Savings | | | | income. |
| Most payroll providers such as ADP and Paychex | | | | • Use the direct savings account deposit feature |
| provide an auto transfer feature directly to your | | | | offered by your payroll provider. |
| savings when you get paid. For example, if you | | | | • View your savings as another bill that has to be |
| elected to transfer 10 percent of your after income to | | | | paid. |
| your savings on payday, 90 percent of your after tax | | | | • Whenever you get a raise, increase your savings |
| dollars would go into your checking account and the | | | | amount by a half percentage point or more. |
| remaining 10 percent would go to your savings | | | | • Save 10 percent of all cash gifts you receive. |
| account. It’s that simple. You eliminate the | | | | • Once you pay off a line of credit (car note, credit |
| guesswork and don’t have to worry about it. | | | | card, or mortgage), continue to pay that same amount |
| Start As Early As You Can | | | | toward your savings. |