Habits are all about the principle of human inertia ― we tend to keep doing what we’ve always done, and shy away from doing something new. The principle may work against you at first. If you’re not used to saving money, it can be hard to get started. But once you gain some momentum with your new saving habits, it will be relatively easy to keep it up. If you haven’t started saving or aren’t saving enough, here are some tips:
- Take full advantage of payroll saving plans. Payroll deduction is a great financial innovation. With one authorization form, you can start a savings program that works for you without any more effort on your part. It doesn’t matter what type of plan it is or how much you put in. Just get started and you have a new habit.
- Aim to max out your company match. When a company offers you a matching contribution, it’s like they are saying, “Here’s some free money. Want it?” Make sure you contribute enough to get the full matching contribution.
- Treat saving as a bill. The old adage for saving is, “Pay yourself first.” The trick is to treat saving like any other bill. Name an amount and a date to pay it, then make the payment when it comes due.
- Set annual goals for account balances. You can never reach a goal if you don’t have one. Specific annual targets for your account balances become incentives to save; and by dividing the difference between your current balance and your target, you can easily derive the periodic amount you need to contribute.
- Devote your raises to saving. When you get a raise, don’t forget to increase your savings. If you can afford to, bank the entire raise. If you can’t do that, at least increase your savings by a portion of the raise.
- Save your loose change. Keep a savings jar, and at the end of the week, put your loose change in it. You may also want to put bills below a specific denomination in the savings jar. At the end of the month, deposit the money in savings.
- Saving is all about discipline ― denying yourself immediate gratification in favor of securing your future. The tips above can take some of the pain out of creating a new habit or adjusting an existing one to help you pursue your goals.
Copyright © Integrated Concepts 2013. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.