Save More Money. Start Today!
Are you having trouble with saving? Do you find that you spend just about every dime that you earn and can’t seem to break the cycle? If this is the case, don’t worry, you’re not alone. Not by a long shot. There are many different ways to save money, but, there are of course many more ways to spend it. It doesn’t help of course that society tells us how much more fun it is to spend than save. Wahoo! Look at my new motorcycle. Much harder to show off a money market account, huh? Well guess what, the comfort and peace of mind that you will gain from a heft savings account will trump any Harley Davidson excitement out there.
So let’s get started. I will tell you the first and most powerful way to make saving money easier right off the bat. Have it taken out of your check each month automatically, and put somewhere where you can’t touch it. There are a couple of ways that you can do this, and you should implement all of them. If you work for a company that has a 401k program, have a percentage, 4% is a good rule of thumb, siphoned off into that account. Now of course, this should be considered an illiquid account, given the fact that distributions will be taxed and penalized, not to mention they will have to be paid back.
Besides the 401k retirement plan you should also carve out atleast 10% of your income for liquid savings reserves. So if you earn $1,000 per pay check, make sure to have $100 earmarked and diverted directly to a savings account as soon as you are paid. Most companies will allow you to set this up on their website, same place whre you set up your direct deposit. Pay yourself first! You can’t spend what isn’t in your account, and you’ll be amazed at how much leaner your life becomes as a result.
Outside of this 10% money market carve out, you will also want to indulge in your company’s stock purchase plan (if it is a publicly traded company of course). These plans, when offered, provide a wonderful opportunity to park your cash in an equity stake of the company. This of course carries with it the inherent risk of equity devaluation, but if you’re confident in the business, then go for it. Most companies offer employees a discount off of the market price of the shares, 15% seems to be the average. This mitigates the downside risk somewhat since you start off with a gain of 15%, plus or minus any price swings down the road. Remember however, these plans will typically lock your investment in for one year from the purchase date so as to discourage intra company trading.
If you have any more suggestions please post them below!