Smart saving and investing can mean the difference between being comfortably affluent or financially stressed later in life. Unfortunately, many people don’t follow the simple actions that can set you up for financial success.
An intelligent financial plan begins with saving money, then learning how to make that money returns higher income for you in the future.
Here are seven simple saving tips to help you forage a path toward financial freedom.
Build a Budget
Building a budget is a great habit to maximize your savings. Budgets help you get a clear picture of where your money is coming from and where it’s going, allowing you to plan out your monthly expenses.
One popular rule for budgeting that you can follow is the 50-30-20 rule. Using this rule, you’ll allocate 50 percent of your after-tax income for your essential expenses, 30 percent for fulfilling your wants, and 20 percent for your savings.
Make a Financial Plan
Hard work is more palatable when you know what you are working towards. Setting a financial target with objects helps you define how much you need to save and measure your progress.
Whether you want to go on your dream vacation or save for your child’s future education, figure out how much you’ll need and start saving for it.
Open a Dedicated Savings Account
Open a savings account if you don’t yet have one. This savings account should be separate from your day-to-day checking account. Money put in the savings account should only be used to buy everyday needs and wants if you hit financial hardship.
With current interest rates topping 4% in some savings accounts, this is a sensible place to start earning some interest.
Automate Your Savings
An underrated way to manage your savings and grow your money is to set up an automatic transfer from your checking account to your savings account. Auto transfers will move money each month without any additional thought or effort.
Out of sight, out of mind! By automatically transferring a portion of your income at the start of each month, you keep it out of your reach and prevent yourself from spending it.
Invest Your Savings
Once you have built three to six months of an emergency fund in savings, consider opening a brokerage account and allocating a portion of your paycheck into diversified mutual funds or ETFs.
Need help to figure out where to start? There are many investment options that you can look into depending on how much risk you’re willing to take but consider starting with low-cost index funds.
Save in a Retirement Account
You’ve probably heard of a 401(k) plan, and many employers will match a portion of the money you save.
It’s a smart idea to take full advantage of your employer’s matching plan as it’s essentially free money, and let’s face it, who doesn’t love free money?
Retirement plans are also tax efficient, saving you money on taxes. So it’s generally a good idea to allocate 10-15% of your paycheck toward your retirement savings if you can manage it. Remember, something is better than nothing.
Make Your Savings Account Less Accessible
Using a banking app can mean that whenever you log in to access your checking account, your savings balance is right there, tempting you to use it.
Consider using a different bank for your savings account, and avoid checking the balance repeatedly to avoid the temptation of using it.
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.