The biggest regret many people have is that they should have saved more and started saving earlier.
In your younger years, it seems you’ll never have enough money coming in to put some into a savings account. The hard truth: that rarely changes. You’ll always find somewhere the money can be spent.
The best way to start saving? Make it a habit. Start early and commit to a lifestyle of saving. If saving becomes part of your behavior, you’ll start there before you begin allocating money towards other expenditures.
Easier said than done. Here are some strategies many experts recommend to turn saving into a behavior and lead you to a lifetime of financial well-being:
Without a budget to follow, it will be very difficult to understand how much money you are comfortably able to save. You don’t want to save at the expense of falling short on bills. There’s a happy medium.
Many experts recommend the 50/30/20 budget method. If you’re unfamiliar with this budgeting method, here is the basic math: your take-home income is allocated 50% for necessities like rent and utilities, 30% for wants or non-discretionary spending like traveling or your daily coffee fix, and 20% for savings and debt repayment.
There are calculators that can help you estimate what your 50/30/20 budget looks like. At the very least, it provides you with a starting point and you can adjust accordingly.
Take advantage of retirement savings accounts!
If your employer offers a 401(k), especially if they provide a percentage match, don’t miss the opportunity to contribute. If you can, contribute at least as much as your employer will match. It’s free money! And we all know how rare that is because of the old adage, ‘Money doesn’t grow on trees.’
Another tip: If you’re fortunate enough to receive a pay increase, allocate money to your 401(k). The additional income is money you’re not accustomed to seeing in your check, so you won’t miss it if you never had it!
This type of savings account is available to employees who participate in a high deductible health plan (70% of employers offer at least one high deductible health plan).
In its simplest terms, an HSA is a savings account that allows you to set money aside on a pre-tax basis in order to pay for qualified medical expenses. One huge benefit of an HSA is that your money rolls over annually. If you don’t spend it on anticipated medical expenses, you never lose it. And once you turn 65, your HSA savings account functions like a traditional retirement account and you’ll be able to use your savings for anything (it will no longer be limited to medical expenses).
Many employers are starting to contribute to HSA saving accounts, so check to see if your employer is one of them!
IRAs allow you to invest your money and let it grow tax-deferred and, in some cases, tax-free. IRAs can be an efficient way to consolidate and manage your retirement savings, especially in the event that you change jobs and need to transfer your employer 401(k) account. You can contribute to both an IRA and 401(k) retirement savings account, so don’t think you’re limited to only one.
There are several options when it comes to an IRA account (traditional IRAs and Roth IRAs are the most common), and all offer tax benefits that reward you for saving.
And this doesn’t mean you have to pay a financial advisor (though of course that’s an option). Many financial wellness programs now offer financial coaching and financial counseling options for participants.
Do your research, because not all programs are created equal. You want to make sure that your financial coach is a certified financial counselor that will offer you unbiased recommendations. They can provide guidance on things like creating a budget (see tip #1), specific debt concerns, mortgage and vehicle decisions, student loan options, etc. If you’re not quite sure how to start your discussion with a financial coach, check out these common counseling questions.