Most Americans have a serious problem with savings.
In fact, a 2017 study found that 57 percent of Americans had less than $1,000 saved up. More specifically, 39 percent of Americans had no savings at all.
Because you’re reading these words, chances are that you’re in the 40 percent of Americans who have enough cash saved up to absorb an unexpected $1,000 expense—and probably a good deal more.
Still, as you look to the future—traveling with your family, supporting your favorite causes, paying for your children’s education and their weddings, and saving for your own retirement—your savings account may be a cause for concern.
Money has wings, after all. And if you’re like most people, you could always use at least a little bit more in your account. If your goal is building a solid savings account so you can cover all the major expenses you expect to incur over the rest of your life, consider putting together a plan that helps you meet your long-term financial goals.
First and foremost, saving should come only after you put together a financial plan. That way, you will know where you are going, whether you are on track to meet your goals, and how much spending you need to cut.
When it comes to saving money—and spending it—everyone has different priorities.
Whereas some families are most interested in stockpiling cash to send their kids to college without debt, others might be more concerned with saving money so that they can go on unforgettable vacations. At the same time, some families like spending money freely, whereas others might be more reserved in their spending habits.
You know your circumstances better than anyone else. As such, only you can decide what your weekly savings plan should look like (i.e., how much money you should set aside and where that money should come from).
Once you’ve figured out what your goals are and how much money you’ll need to attain them, you can then begin to work backward to figure out how to get there.
For example, you might decide to route something like 10 percent of your paycheck to a savings account to start stockpiling cash automatically. You might also choose to put big windfalls—such as tax returns and bonuses—directly into your savings account to build a bigger cushion.
Although your long-term financial plan is a critical component of your weekly savings plan, it is not the only thing you need to include.
Up next, let’s explore some of the other things you may want to do to increase the chances that your plan works for you.
Just because you’ve put together an incredible plan doesn’t mean that it’s going to meet all of your needs on its own. Consider monitoring your spending on a weekly, or at least monthly, basis and track it over time to make sure you’re not spending your money recklessly.
Keeping tabs on your spending might take some time, but take comfort in the fact that it would have taken a lot longer just a few years ago. Virtually all banks and credit card providers let you easily monitor your spending online, and new services such as Mint and EP Wealth’s Personal Financial Website consolidate all of that data in one place, streamlining the process.
No matter how much you’re spending these days, odds are that you could probably cut your expenses at least a bit. For example, a $5 cup of coffee every day adds up to more than $1,500 over the course of a year, and you could probably get a top-notch espresso machine for less than half of that.
As you analyze your spending and compare it over time, you’ll likely identify areas for improvement. The more you focus on optimizing your spending, the easier you may find it to afford those trips to Bali, tuition bills, and philanthropic endeavors.
You’re not a robot (unless you actually are some kind of AI-powered bot!).
Even if you are the steadiest spender, you’ll probably splurge every now and again. Maybe your daughter turns 16, and you want to get her something really special. Or maybe your favorite team makes the Super Bowl, and all of a sudden, you’ve decided to take your family to see the big game.
On one hand, there’s no point in pinching pennies for decades and having no fun, so you may want to consider building some extra room in your weekly savings plan. On the other hand, you can also learn from your mistakes. If the brand-new iPhone comes out and you immediately shell out $1,000 even though your current model meets your needs perfectly, you might want to consider waiting to upgrade next time.
A weekly savings plan is a critical part of a healthy financial future, but it is only one part. To learn more about what you can do to secure a healthier financial future, check out our new e-book: The Retirement Planning Guide for People Who Don’t Want to Work Forever.
DISCLOSURES
The EP Wealth Advisors financial planning process starts with the relationship between you and your financial advisor. How do you value a financial coach? Developing a partnership that ensures we understand your goals lets us help you prioritize and organize your financial decisions—so you can achieve peace of mind and live your life.
