So, you have already began the first plan in tackling down your debt. Awesome! Or maybe you are the lucky few that have no issues with debt, but you want some great tips to save. Focusing on savings will not only help your finances now, but you can create a lasting legacy! This is a prerequisite to long lasting generational wealth.
Let’s begin with these six steps to saving and saving for your legacy. Now there are many other tips that you can use to save. This post highlighted more of the “finance” element of saving.
1. Know Your Ins and Outs
The key thing to really start to save effectively is to know how your money is moving in your personal “income statement.” In layman’s terms, how much you bringing in (income) vs. how much comes out (expenses). To do this you need to track the movements by keeping an account of your expenses. Since income is generally pretty stable and consistent it’s not necessary to track. Three months will provide enough data to see where your money is flowing.
With that info: slash, dash, and trash all non essential expenses, cut or scale back where you can. No more eating out every weekend, you know who you are! No more impulsive purchases, yes I am talking to you! Another night out with the guys/gals, I see you! All jokes aside, if you are going to save for the future and the future of your family you have to manage your personal “income statement.”
2. How Much To Save?
Great question, glad you asked! While everybody’s circumstances and where they are in life are different, you can still manage to save something. So this will depend on what you are most comfortable with. Do not over stretch yourself, just to hurt yourself in the long run. Savings is like a “Marathon” it takes time and everyone can go at their own pace.
With that being said, it is advised to save 5-10% of your income (paycheck). Remember though, even the smallest amount eventually adds up over time. With the additional cutbacks from tip #1 you will be surprised how much you can really save no matter the income. You got this!
3. Automatically Credit Yourself
This tip kind of connects to tip #2 in that it is about putting money away. We are of the ideology of paying ourselves first before even paying are bills. Once you decide on the amount you desire and/or are comfortable to save, just start. Setup an automatic transfer from a checking account to a savings account or emergency account.
I actually have my transfer setup from my checking to an IRA account. Less access on my part which is good for me and I am not to fond of putting money in bank for a long periods of time see why here…
4. Budget and Goals
Creating a budget and setting goals are good ways to keep your savings on track. When you have a good idea of how your money is flowing you can plan around it. As I mentioned earlier cut out unnecessary spending. Make a list of all your expense and budget around them.
Setting goals allow you to measure tangible result quickly. Start small, for example create a goal for the next 3 months. Then extend it for the next 6 months sooner or later you have created a good habit. Nice work!
We recommend using Personal Capital with helping managing and organizing your finances they are great!
5. When It Rains (Trust Me It Will)
Who has heard of that old saying, “when it rains it pours”? We all have I am sure. Well when this is accurate it can have some devastating consequences. In terms of not properly saving for a “rainy day”, you can set yourself back years. An untimely death, a layoff, even your car breaking down can cause a serious pinch.
Saving and putting something, aside for an emergency is not only smart, but responsible. Gold star for you, if you have an emergency fund! As I kind of pointed out you never know what is going to happen in life.
So be ready for the unpredictable it’s worth planning for some of the “what ifs” especially when it comes to finances. Again build slowly but the goal here is to have 3-6 months worth of your essential expenses saved. This normally will be your major recurring bills: groceries, rent, car note, utilities, and insurance (yes life insurance, health insurance, disability insurance) are very important in creating a legacy. Don’t neglect these, you never need them until you need them right!
A simple savings account will do, but there are other options like money market accounts, cash on hand in brokerage accounts, just to name a few. You just want to make sure this money is easily accessible and easy liquidated for EMERGENCIES! I should mentioned this account can be an addition to your regular savings that you are building.
6. Plan Or Plan To Fail
I know, I am back at it again with another old adage, but is not true though? Success rarely just happens without proper planning and this hold true when it comes to savings or anything for that matter.
Devise your plan. Start by talking to people close to you and leverage their information the good and bad. Read about and learn from others that have achieved the success you are seeking. Begin to surround yourself with like minded individuals this can really be instrumental in changing your life and thinking.
Once you have devise a plan now its time to implement, but always adjust along the way. While creating and changing your habits successfully, you will be able to pass on this knowledge with the goal of creating a legacy.
Please leave a comment below and let me know if you found this post helpful.