Savings 101: Making Sure You Have Enough Money for the Future

Nov 25

Do you use your hard-earned money to buy just whatever catches your fancy? Have you ever considered setting aside part of your monthly paycheck for the future?

For some people, the future seems so far away that they don’t feel it’s necessary to think about it. But in reality, there’s no better time than now to organize your finances for retirement.

As recent studies have shown, we aren’t doing enough to save for the future. According to a report by the U.S. Federal Reserve, almost a quarter of Americans have no pension or savings for retirement. Almost 50% of these respondents come from the 18 to 29 age group.

Preparing for the Future

Even though it’s tempting to spend your monthly paycheck on whatever you want, setting aside a part of your funds helps you in the long run. Imagine yourself at age 65. Where will you be living? How are you going to pay for your daily expenses? You can’t rely solely on Social Security, and you need investments and/or savings to replace the salary you’ll no longer get from your job.

Without savings, you also open yourself up to financial risks brought on by unforeseen events: an expensive fixture replacement at home, medical expenses, or sudden loss of a job. You will need to set aside money for emergencies to avoid taking out a loan that your savings might have otherwise covered.

You can also make bigger purchases when you save with the future in mind. You’ll have enough to buy a bigger vehicle, upgrade to a better house, or take a well-deserved vacation.

How to Start Saving

Ready to save but not sure where to start? Or are you overwhelmed with the gamut of advice floating around? Here’s a step-by-step guide to help:

1. Set your financial goals

Take some time to write down your current financial status. Start by recording your income, monthly bills, and existing loans. Check how much you’re spending on daily expenses like food, clothing, and entertainment.

You may have many goals in mind, whether it’s paying off all your debt, funding your retirement, or stashing a bit for your dream house—all while maintaining monthly bills. Trying to make progress in all areas at the same time is exhausting, so focus on even just one goal at a time. If you aim to be debt-free or to save up for an emergency fund, that’s where your focus should be.

2. Create a budget

Figure out exactly where you’re spending your monthly salary before each month begins. Label your regular expenses and assign a percentage for each item you’ll spend on, including the amount for your savings. Identify your needs and wants and see which items you can cut back or spend less on. You could unsubscribe to subscriptions you can do without, make coffee instead of buy it, or use coupons for your grocery shopping.

3. Automate your savings

Chances are you receive your salary through direct deposit, so make use of that to direct your money into different accounts. Transfer an amount of your salary into a separate savings account every payday. That way, you’ll spend only from your bank account that’s meant for daily expenses.

4. Splurge now and then

It may sound contradictory, but splurging every now and then helps you feel less restrained in tracking your spending. You can set aside an amount meant for spontaneous spending or reward yourself when you’ve reached a milestone in your financial goals.

Even if your life feels stable, you never know what will come up in the future to compete for your resources. These tips will help you stick to your budget and meet your financial goals. That way, you won’t live out retirement years with limited choices.   

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