This week we’ll review a great clip from Morningstar’s Christine Benz. She is regular contributor to Morningstar, a very highly respected financial research company. She tells us a few very basic rules of thumb for squeezing those few extra investment dollars out of your budget. Whether you are barely scraping by on your current budget or coasting on a higher income, there is no reason to let money slip through the cracks. Here is my summary of Christine’s three money saving tips and a link to her video below.
First: Start with the Savings In Mind
It is all too easy to find ourselves budgeting backwards. By this I mean we live our lives and decide what to do with what is left of our income afterwards. Christine suggests starting with a savings target first and living within the parameters of your remaining income second. We at Granite Financial Partners would have to agree. It cannot be said enough, “failing to plan is planning to fail”. Too often we see well intentioned people fail in their financial goals because of simple errors in philosophy. Call us to set up a cash flow planning meeting and we can make sure you are on track.
Second: Higher Salary Should Mean Higher Savings
As your income adjusts, so should your savings goals. Higher earners should be setting aside more, not only from a dollar amount standpoint, but from a percentage of income standpoint as well. Christine recommends targeting at least a 20% savings rate and while that is a good suggestion, we recommend a professional consultation to make sure your additional savings are accomplishing what you want them to. Depending on your situation different tools and strategies have varying efficacies at achieving different goals. Let us help you sort through the financial labyrinth to be sure your additional savings are really accomplishing what you want them to.
The easiest way to stay on track with a savings goal is to automate your contributions. Just like with a bill payment, your 401k and IRA contributions can set to take place automatically at an amount and interval of your choosing. This ties closely with our first segment, “Start With the Savings In Mind”. It is much easier to meet your savings goals with it is set to automatically withdraw periodically. This brings the additional benefit of dollar cost averaging. The concept here is if you invest at a scheduled time repeatedly over the years you will be investing in both positive and negative markets. This allows you to invest at the long-term average cost.
Thank you for reading and I hope you enjoy the video below as much as we did. Please reach out to us at Granite Financial Partners directly with any questions or comments and be sure to tune in next week for more helpful insight.