This week we’re highlighting America Saves Week – but what does that mean for you?
Nearly half of families from their 30s through their 60s have nothing saved for retirement, according to the Economic Policy Institute. With many of us living well into our 90s with advances in medical care and treatment, that’s a scary thought.
Even if you’re rapidly approaching retirement, about 28 percent of us have less than $50,000 saved up for it, and another 10 percent of us have less than $100,000.
About 70 percent of Americans also have less than $1,000 saved up for general purposes.
So what can we do to be better prepared? With the next stimulus package being discussed on the national stage this week, especially for those of us with children, that could free up a little bit of funds to focus on saving! Here are some tips you can follow:
- Increase the percentage of your paycheck going into your retirement account.
Each year, increase the percentage of those salary dollars going toward your retirement by at least one percent. The recommendation is to save between 10 and 15 percent of your income in your retirement accounts, which may seem like a lot! You can get there by staying steady with increasing the percentage regularly.
- Know your variable expenses each month.
Many of our expenses from day to day we can’t change: electric bills and mortgage or rent. But there are variable expenses we have some control over – new shoes, ordering takeout, our subscription channels for our shows, buying a gift for someone, or giving a donation to someone in need. Figure out how much your total dollars are to spend on variable expenses each month and set a cap on it. You can divvy it up into buckets if that’s helpful – $100 for takeout, $50 for gifts – and commit to spending only that amount each month. You can save up between months to make a larger purchase, such as putting away $25/month for vacation expenses. Knowing where those variables are and choosing to spend what you’d like while keeping a bead on your savings goals will help you reach those goals without overspending by accident.
- Have an emergency fund
It is not fun at all when we get hit with an unexpected expense – a car problem we need to fix, an appliance that breaks, or a medical bill. One way to help plan for those annoying issues is to have an emergency fund. It can take awhile to build up, but committing to putting away some cash each month into a savings fund means that when you get hit with those expenses, you’re not putting it on a credit card with astronomical interest or cutting into something else such as your vacation fund or grocery bill. This kind of savings takes commitment, but it is such a stress relief to have it in place. Generally, the rule of thumb is to have three to six months of savings put away in case of emergency such as a job loss.
- Work from a goal
You may have some dreams for this year, or for many years in the future. It could be a big goal such as purchasing a home, or simply putting enough away to travel someplace new once a year. It could be the latest video game when it comes out, or a new dishwasher because yours has been broken for awhile and you’d like to not have to wash everything by hand. Maybe it’s simply paying down the credit card debt that built up over the roller coaster that was 2020. And of course, a goal to be able to retire and enjoy life in retirement. Decide what your goal is, and maybe you have some short-term goals and some long-term goals, and then set up automatic savings towards them. It’s so much easier when the funds just get deposited every month than trying to remember not to spend it or move it!
- Work on small ways to save.
Make some small habits part of your every day life. Maybe every time you splurge on something simple for you – a smoothie or pizza for lunch – you put the same amount into your savings account. Maybe you only have water whenever you’re eating out or ordering takeout. Ask if generic medications are available instead of brand-name. Install low-flow showerheads, faucets, and toilets to reduce your water bill. Review your subscription plans and decide the ones you’d like to keep right now, and turn off the others. Shop in used clothing stores instead of new. There are all kinds of little things you can do to help free up funds for saving!
Having good savings practices and being prepared for retirement takes intentionality, but it also can decrease anxiety and stress to have a goal and know you’re on the path to reaching it!
Domani Wealth, LLC (“Domani”) is an SEC-registered investment adviser with offices in South Central Pennsylvania. Domani and its representatives may only transact business in states where they are appropriately notice-filed and registered, respectively, or exempt from such requirements. For information pertaining to the registration status of Domani, please contact the SEC or the state securities regulators for those states in which Domani maintains a notice-filing.