Tuesday, March 18, 2014

Saving for the Future

Everyday I remind myself that I need to save more money. I love to shop but this year, I have made it a personal goal to spend less, and save more. I came up with an “aggressive savings plan” that should put everyone on track to being financially comfortable. First off, saving for retirement is a top priority. I’ve been working since I was in grade school- Yes it was a family owned business, but the business was a product of child labor! So I don’t know about yall, but I'm trying to retire by 50.

Saving for the Future- Aggressive Savings Plan- 50, 30, 20

Having a 401k is very important because it is an account that you will rely on when the opportunity to retire comes along. I suggest only investing in your job’s 401k if they offer to match- The previous company I worked for matched all monies contributed, 6%. That’s a big deal- Meaning for every $500 contributed, they add $30. Every bit counts! In addition to your employer 401K, I suggest every human being earning a paycheck invest into a Roth IRA. There are many advantages to having a Roth IRA, the most notable being the fact that you pay no taxes on the funds in the account. It’s like a gift to you from Uncle Sam- Take advantage! According to Kiplinger.com “If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have $1.4 million saved by the time she retires at age 65. And the money is all hers — she won't have to give the IRS a cent of it if she waits until retirement to withdraw the earnings.” If that isn’t enough to have you racing to your nearest bank as soon as you get done reading this post, there’s some screws missing! This 3easiest way to ensure you are contributing to your IRA is to set up your direct deposit from your employer to contribute a percentage or set amount directly into the account. Since the max contribution is $5500 a year, Starting in January, if you get paid bi-weekly, that's $230 every pay period.
There’s lots to know about Roth IRA’s – How to get one started, what to invest in (stocks, CD's, real estate & more,) accessing your money early (you can access your contributions out with no penalty, but touching earnings carries a hefty drawback,) and many other aspects. Check out this awesome blog for tons of info on everything to do with Saving $$... Specifically their article on Roth IRA's! Our Freaking Budget- Why to start a Roth IRA

Next, when it comes to using the money you earn from your job, It is best to have 3 different bank accounts, in addition to your IRA. You have to have a budget first to know what works for you. Taylor it to what your income allows you to do.
The funds remaining after your automatic direct deposit to your Roth account should be split up into 3 accounts.

50% Bills
30% Savings
20% Everything Else
Example: Your net direct deposit (after the auto deposit into your Roth account,) is $1000. $500 will go to bills, $300 will go to savings, and $200 will be fun money, and everything else. For me that's, entertainment, dining out, gas, dry cleaning, pet supplies, unnecessary crap I feel like I need, etc.

Sticking to this plan allows me to simplify my spending and saving. When I run out of "fun money." I'm broke. Yes, sometimes it is necessary to I always dip into my savings, but this bad habit is improving, and I'm getting to the point where I can say no to going out because I am thinking more about my future, than fun nights on the town.
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