When you reach retirement age, that $1 million would be a game-changer — because all the lattes in the world can’t calm the anxiety of being unable to support yourself. The good news is, even if you’ve neglected your savings in the past, you can make changes today that’ll benefit you for years to come. Get moving toward that $1 million balance by implementing these five savings tactics now.
I found this great article by The Motley Fool and I am putting down the top 5 highlights to make it short and sweet -
Article by the Motley Fool
1. Redirect impulse buys into savings
When you do catch yourself reaching for an impulse buy, jot down the item’s price. Assuming you don’t make the purchase, transfer that amount from your checking to your savings account.
2. Automate your savings
Follow Warren Buffett’s advice and save first, before you spend. Do this by setting up automatic transfers from your checking account to your savings account. Time these to go through the same day you deposit your paycheck. That way, these savings deposits will feel like a payroll deduction.
3. Invest for higher returns
A high-rate cash savings account might pay you 2% annually. But invest that money for the long term in low-cost mutual funds and you stand to earn 6% or 7%. Over 20 or 30 years, the difference in your earnings can be substantial.
You should keep enough cash on hand to cover three to six months of your living expenses. Consider this your emergency fund that you’d tap into if your income decreases or your expenses increase unexpectedly.
4. Increase savings contributions annually
Put a recurring appointment on your calendar to review your savings progress at least annually. If possible, time your savings review to coincide with your annual raise.
5. Reward yourself
People who are on diets often reward themselves with cheat meals to break up the monotony of their restricted meal plans. You can employ the same strategy to keep yourself motivated about saving. Set milestones for yourself and establish a reasonable reward for reaching those milestones.
Saving and spending don’t have to be at odds with one another. Warren Buffett would agree: You can do both as long as prioritise saving first.