Embark On The Path Of Saving
Tuesday, February 26, 2013, 2:00 AM | Leave Comment
In real estate, it’s location, location, location. On the Internet, if you have a website or blog, it’s content, content, content. These days, in personal finance, the mantra has to be saving, saving, saving.
And remember there is no wrong way to save. It’s always right. But to do so, you need a mindset for saving, a change in your financial lifestyle.
Government data show that in the face of the financial crisis, we have reduced our debt, cut our spending and, by one measure, boosted personal savings to the highest level this decade.
So what are you going to do with your savings? Some financial experts suggest to rebuild your retirement accounts.
Others suggest to buy a new home, boost your kids’ college funds. Still some others suggest to put it away for a rainy day.
Everyone has a different priority
Each option or some combination would be Okay as long as you don’t spend it uselessly. Unless you have stocks or bonds that you are willing to liquidate, you need enough cash to cover a few months of crucial expenses, such as the rent or mortgage, bills and groceries.
Depending on what stage in your life you are at, the following are some options you can investigate:
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Saving money from a first-job salary – just starting out
By transferring a little money to your savings account with every paycheck, you will accumulate an emergency fund without even realizing it. If your debt has lots of high-cost credit cards, you will want to pay it off as well.
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Saving money when you have a family
You will want to starting thinking about a college-savings account when your kids are still young and you have a lot of years to save that will help your financial health later on.
College is expensive, but try not to get overwhelmed: It doesn’t have to be fully funded before your child leaves high school. If you are also paying down a mortgage, that’s a form of savings too.
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Saving money when the kids leave home
People in their 50s and 60s should focus on building up their retirement savings, aiming to contribute the maximum allowed, up to $16,500 annually – plus $5,500 in catch-up contributions each year – plus whatever they can save outside those accounts.
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Saving money when you retire from work
Funds needed for the next five years or so should be in cash or short-term investments so they won’t be subject to stock-market fluctuations.
Grow your saved money…
Since the savings and money market accounts give minimal interest, you can’t grow money with it. The best way is to invest in stocks, bonds, mutual funds (especially equity mutual funds) using dollar cost averaging. Slowly but surely, your money would continue growing.
In a Nutshell
No matter how hard you try, there never seems to be enough savings to cover everything, even if you put away the 10% to 20% of your income that many financial advisers recommend.
And let’s face it, many of us don’t save anywhere near that. But there is nothing wrong with trying.
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