Pay yourself first. Rather than the way we all do it, pay all the bills and then whatever is left we save, and there’s always nothing left. Before you pay any bills or anything cut yourself a check to put into savings. Although you may find it difficult at first, the key is to pay yourself first. It is a great way to get in the habit of saving. Before long, you will be very happy that you are saving and paying yourself first, not last.
Do it automatically. Pay yourself first automatically. It’s easy to do electronically. Simply have a certain amount from your paycheck deposited into a financial account. You’ll complete a form authorizing your bank (or whatever institution) to receive a portion of every paycheck and deposit it into your savings account. This is a great way to build up your savings—if you don’t see the money, you won’t miss it.
Save 10% of your paycheck. A good rule of thumb is to save 10% of your paycheck. If this feels too high, try 5% for a while. Then, try to work up to saving 10% of your earnings. You’ll thank yourself over and over for doing it, once you’ve retired. Remember something is better than nothing.
The power of compound interest. Not all investing strategies are complicated. Perhaps the simplest strategy of all is to just leave it alone and let it accumulate over time, or “compound.”
Thanks to the power of compounding, the more money you save, the faster it grows. That’s because you earn interest not only on what you save, but also on the interest generated. The earlier you start to save, the more dramatically your money can grow.
Example: Let’s say you start out with $100 and it earns 5% compound interest. When your interest is compounded, the bank takes the interest that your account has earned during the previous day, week, month, or year. It adds that interest to your principal and then calculates your new interest payment. If you receive 5-percent compounded interest on a principal of $100, your investment would grow like this:
Year 1: $105.00
Year 2: $110.25
Year 3: $115.76
Year 4: $121.55
Year 5: $127.63
Those are 4 ideas are the keys to having a successful retirement, for more information on how to implement or see if they fit it your budget, please give us a call 770-617-5102