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Start Saving Money Before You Need it

Start Saving Money Before You Need it

You can never start saving too early. Whether you’re saving for a rainy day or retirement, you should be putting some money away on a regular basis. For one, this gets you in the habit of saving consistently. More importantly, saving early is one of the best things you can do for your finances in the long run. The earlier you save, the earlier your money will begin accruing interest. This interest will accumulate over time, so not saving as early as possible is essentially like throwing money away. In this post, we’ll give you tips on how to start saving early.

Start with a Budget

Maintaining a budget is key to saving early and successfully. A budget will tell you where you are and where you’re going with your finances. You might try the 60% method, where you use the first 60% of your pre-tax earnings to pay for essentials, and the rest goes toward savings, debt payments, and recreational spending. Here are some other budgeting tips:

  • You should be spending about $150 per month on groceries/food. If you’re spending more than this, you are probably eating out or buying items you don’t really need.
  • Make sure you include credit card payments in your budget. You want to pay off any high-interest debts as quickly as possible.
  • Prioritize the repayment of student loans. Don’t neglect your student loan debt, but don’t pay it off prematurely either. This is fairly low-interest debt, so focus your efforts on credit cards.

Save Now

You can always find a reason not to save, but you will never get the chance to save this early again. Seize the opportunity while you have it. Follow these tips:

  • If your employer has a 401(k) plan, sign up. Most employers will match your 401(k) contribution dollar for dollar, so don’t pass up the chance to literally double your savings for free.
  • Use the stock market. When you’re young, you have ample time to build up your savings, so you can afford to be aggressive. Put 90% of your investments in stocks, which have grown at a rate of 10% annually in the past.
  • Get a Roth IRA. You will contribute to your Roth IRA with after-tax dollars, but when you withdraw money from the account later, it will be tax-free.
  • Start building an emergency fund. You don’t want to have to turn to credit cards and loans if your car breaks down, you have unexpected medical expenses, or encounter any other financial misfortune. You should have about three months’ worth of living expenses saved, but if you can’t do that right away, just start putting something away each paycheck.

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