Save Up! Tips to Good Savings Habits for Your Retirement
Written by Kristina Lee
Piggy Banks don't fill themselves, so how do they fill up? Slowly, and carefully - by you. Here are a few tips and tricks to make Mr. Piggy Bank as fat as he can be:
Set Goals: A meaningful, long term goal will give you an incentive to refrain from spending now, in order to enjoy that goal fulfilled later.
Keep Good Records: Tracking exactly what you earn and spend will help you keep a good idea of where your finances are at any given point of time. Keep all receipts and pay-stubs, and update a spreadsheet that organizes your finances each week.
Put the Pressure On: A lot of people state that they work the best under stress: this goes for saving as well. If you set a deadline of when you want to have x amount saved by, as that deadline approaches, you will save more and more to meet your goal.
Review Your Budget: Knowing where your money goes is important. See our section on Budgeting to find ways to lower your expenses and stick to your budget.
Freeze that Plastic: Stay away from using credit cards too much, especially on luxury and entertainment buys. Using checks or actual cash helps the effect of that purchase sink in better, and may help curb frivolous and unnecessary spending.
Plan your Food: Plan your dinners for the week, and use a list when you go grocery shopping, so you can buy in bulk and reduce your impulse buys, even if it is on food. This also cuts down on dining out and getting take-out - big sources of wallet drainers.
Luxury vs Need: Before you purchase anything, always evaluate whether your life would change dramatically if you did not buy that item. If you can't think of any legitimate change, then chances are this is a luxury good that you want but do not need. Consciously thinking about wants vs needs helps consumers to evaluate choices and not buy recklessly without thought.
Prioritize Your Goals: When calculating what you have to pay each month, think of your goal fund as a priority, just like your electric, cable, and water bill. Refrain from making it "optional,” to ensure that you pay yourself each month without fail. Saving is (mostly) all psychological.
Increase the rate of return on investments, or the stability: If you are young and plan on working for a significant amount of years before retiring, you may be able to take more risk on your portfolio, in order to gain a higher rate of return. If you are planning on retiring soon, reduce the volatility in your portfolio to obtain a more secure picture of your future savings.
As your income rises, increase your monthly retirement contribution: Once you have a set standard of living down, use bonuses, raises, and other increases in income (not already earmarked for education funds or other goal funds) to add more to your retirement fund.
Save the Leftovers: You don't throw away the leftover food after a party, or after dinner, so why would you throw away leftover money at the end of a month? Save it, and add it to your goal fun. This will buffer your fund against months when unexpected emergency expenses arise, such as medical emergencies.
Now if the prospect of saving so much seems daunting, just remember: The one who is slow and steady always gets there faster than the one who doesn't start at all. Good luck!
