Whether you’re a recent college graduate in your first career job or you have been working for several years, a lot of people are finding it difficult to save for the future. Real-world inflation is making it difficult at the gas pump and grocery store, but less-than-stellar money skills can be the main culprit in saving for the future. Most of us do not learn money skills in school or from family, so we are left to figure it out on our own through trial and error.
For weekly insights, follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.
Ideally, you would start with a detailed budget using an app, such as Mint.com. There are a lot of great ones (check out this LINK from NerdWallet). Setting up and mastering a budget system takes time, but it is worth the effort in accelerating your goal to financial freedom…that point in time when you are working because you want to rather than have to.
When starting your budget system, follow these tips to jump-start your financial success:
- Pay yourself first, automatically. If your budget plan is to save what’s left over at the end of the month, you are doomed to join the 97% of our population that never achieves financial freedom (and most retire nearly broke and living primarily on Social Security). Instead, set up an auto-draft from your checking account directly into a savings/investment account to coincide with your paycheck deposits. This may be more than once per month.
- Save 15% to 25% of your gross pay. Yep, these are large percentages, but this is what it takes to achieve financial freedom while you are still young enough to enjoy your money. Remember, some savings will go into an emergency reserve account and should equal 3 to 6 months of monthly expenses. Some should go into your long-term retirement account, and you will want to have some savings for targeted shorter-term goals (i.e. a down payment for a home, etc.).
- Embrace time as your greatest ally. I started saving 20% as soon as I got my first post-college job. In the beginning, it looked like such a small amount that it was hard to imagine that it would ever make a difference. After a few months, I was surprised at how it began to add up and I was encouraged to both continue saving and save more. Before long I had enough to buy my first property; then another and then another…and after a few years I saw a significant boost in my net worth. Time and money saved are your greatest allies.
It may feel like you have all the time in the world to set money aside, but it is vitally important to start planning and saving NOW. The sooner you can start setting aside money for retirement, savings, etc., the better for your financial independence. If you have any questions on how to get started, be sure to consult with a Certified Financial Planner.
Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Welch Group, LLC [“Welch”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Welch. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Welch is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Welch’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.welchgroup.com. Please Note: Welch does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Welch’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.