Many people, for a wide variety of reasons, do not have a plan for the future. According to the Northwestern Mutual 2018 Planning & Progress Study, 21% of Americans have nothing at all saved for the future. The next 10% have less than $5,000 saved. Sometimes it’s hard to know where to start (and honestly, it’s not as fun to save as it is to spend), but procrastination will be your worst enemy.
Having a plan in place will help you work toward your financial goals; Whether that be for your emergency fund, new home, your retirement, or even next month’s bills. The future waits for no one. So, if you are a money saving buff, perhaps read the next part of this article and brush up on your already great money habits. Otherwise, if you are looking to get started, here are my top five tips:
1. START NOW! – Whatever you are saving for, it is important to start immediately. The reasoning can be simply expressed as the immense power of compound interest. For example, if a 25-year-old starts saving $150 per month they will have over $523,000 saved for retirement by age 65. This scenario is based on an individual contributing roughly 6% of a $15 per hour salary, compounded at an 8% interest rate.
Now, if that same person started saving just 10 years later at age 35, they would need to save $351 per month to achieve the same result.
If that same person waited until they were 45 years old, they would need to save $888 per month and would have to contribute $141,120 more than if they had started saving at 25.
2. Put Your Plan on Paper – This tip is threefold. First, write down your goal. Next, make a list of action steps that you believe are necessary for achieving your goal. Then, find an accountability partner to share your progress with on a consistent schedule. According to research by Dr. Gail Matthews, a Psychology Professor with Michigan State University, 76% of participants who wrote down their goals, actions and had an accountability partner were successful in reaching their goals. Only 43% of those examined in the study were successful in achieving their goals without writing them down.
3. Communicate – If you are married, communication is everything. The best-laid plan will be unattainable without the commitment of both spouses. When you decide to make a plan, it is incredibly important to get the buy-in of your spouse before you proceed. Ramsey solutions conducted a study in 2018 and confirmed the number one topic couples fight about is money. Don’t be a statistic! Find something more exciting to fight about.
4. Stay the Course – Life has a way of throwing a million challenges at whatever plan you put in place. One of the key differences between those who achieve their goals and those who don’t is the perseverance of the ones who stay the course.
5. Teach Your Children & Grandchildren – Good money habits are often generational. No, it’s not just potential inheritances that can make the next generation financially savvy. In fact, if the next generation hasn’t practiced good financial habits and is given an inheritance, that money likely won’t be spent in a prudent manner. In fact, as shown in a study through Cambridge University, many financial habits may already be set in place by age 7. Experiential learning is best. Start early and practice often.
Email me your questions at luke@copperlinewealth.com or call 307-586-1880.
