How to Save Money Throughout Your Life
Point of Interest
Building your savings for the future is not about grandiose moves; it’s about small steps repeated over and over again.
No matter at what stage or age you are in your life, saving is a critical component of fiscal responsibility. While most people agree with this statement, many are unsure how to get started or how to save money and take their savings plan to the next level. The good news is that with a comprehensive plan, a few helpful money-saving tips and some basic financial discipline, you and your family can achieve your savings goals.
Saving money is important: Here’s why.
The list of reasons to save money is endless. You might have a particular goal in mind, be planning for future expenses like retirement or just preparing for a rainy day. While you may have enough money to cover your expenses and life right now, you never know what tomorrow may bring.
One of the most important reasons for saving money is in preparation for retirement. Unfortunately, many Americans struggle to be as prepared as possible. According to the Congressional Research Service, 4.7 million people aged 65 and older were at an income level that fell below the federal poverty threshold. While this is an improvement from years past, it still should serve as a wakeup call.
If your retirement plan is to live off of Social Security, you may want to consider augmenting that with some savings. In January of 2020, the average Social Security benefit paid out was $1,503 monthly. This may not be enough to cover all expected expenses.
Good habits to help you save money
Before discussing specific money-saving tips by age group, you need to understand several general tips and habits necessary to help you save money. All of these tips are applicable regardless of your age or where you are in your savings journey.
Develop a plan of action and exercise discipline.
If you don’t have a plan for saving, it will never happen. Life’s temptations and random occurrences will always push saving further down the priority list. Additionally, the best-laid plan is worthless unless you’re willing to stick to it. Building your savings for the future is not about grandiose moves; it’s about small steps repeated over and over again.
Understand the difference between a need and a want.
You might think you “need” that new car, but is that the case? It might be, but for a lot of people, a reality check will show that what they classify as a need is just a want. There’s nothing wrong with getting things you want from time to time, but these are the areas where you can choose to make small sacrifices now for future benefits.
Track your progress and be prepared to adapt.
The only way you’ll know if you’re on track to reach your savings goals is by monitoring your progress. Additionally, tracking your successes and failures can help to motivate you to press on through the tougher times when other areas of life seem like a higher priority for your money. If you see you’re off course or are not on track to hit your goals in time, be prepared to adapt. Savings plans are not and should not be rigid. They are designed to be strictly followed, but you can make calculated adjustments based on your results.
Tips for saving money in your 20s
Your 20s are your time to begin implementing best practices for the rest of your life. Typically, you’ll be making less money now than you will later in life. Putting a percentage of your paycheck aside for savings will be easier. When you advance in life and your income goes up, you’ll be able to continue those good habits more easily.
Don’t rack up major debt on life purchases that you don’t need or can’t afford. This includes things like houses, cars, weddings, personal loans and vacations. If you want or need these things, set up a savings plan and purchase when you can responsibly afford it.
While you should begin saving for retirement during your 20s, the most important element to worry about is accumulating rainy day or emergency funds. Typically, experts advise having three to six times your monthly bills and expenses saved. but, if your employer offers a 401(k) program, it’s never too early to start the retirement savings game.
Tips for saving money in your 30s
Your 30s are the ideal time to turbocharge your savings. While you’re still most likely far from retirement, you’ll want to start significantly building your savings. Experts recommend having the equivalent of a year’s income in your retirement accounts by 30. The three to six times your monthly expenses for a rainy day fund remains constant but may need to be adjusted if your expenses have increased.
Avoid the temptation to lose the successes you’ve already had. For many, their 30s is when they’ll start to see sizeable chunks of money in their savings accounts. Don’t fall into the temptation of taking out this money to buy something that you don’t need.
As your income increases into your 30s, you should be maximizing contributions to your retirement accounts. The IRS offers some lucrative tax benefits for retirement contributions that you should be taking full advantage of.
Tips for saving money in your 40s
By your 40s, your savings should be starting to grow into sizeable accounts. Many experts recommend having around two to three times your annual salary in your savings by this time.
Don’t be tempted by a mid-life crisis to live outside of your means. If you’ve done everything right up until this point, you don’t want to erase all your progress with an impulse buy to make yourself feel better.
Tips for saving money in your 50s
Many experts agree that by 50, you should have around six times your annual salary in your retirement accounts. If you’re there, great. If you’re below this, look for ways to increase your savings contributions to grow your accounts.
Don’t move your funds to riskier investments just to catch up. As you near retirement, your accepted risk should be decreasing as you have less time to recover from a riskier investment.
Don’t be discouraged if you feel like you are behind the curve on your savings goals. If you are below the recommended limits, it’s never too late to get started. Remember, even saving $1 toward retirement and your savings goals is better than saving $0. Develop a plan, follow it to a T, track your progress, and refine all along the way. Before you know it, you will be caught up on your savings and experience the financial peace that comes with that status.