Mistakes We Make When Trying to Save Money
Saving money is a common goal for almost everyone.
We all want to retire with a sufficient amount of money, so you can do the things you’ve dreamed of in your golden years. For many, saving money can seem like an impossible task. They look at their accounts and wonder where their hard-earned money went. It’s not impossible to save money, but there’re many mistakes we make that make saving money seem out of the question. Here are the most common.
Not Paying Yourself First
Many times people are very quick to spend their paycheck the moment they receive it. They mistakenly think it’s okay to spend money and then save what is left over – if there is anything leftover. Consider storing away money right away, or “pay yourself first.” This can mean putting money towards savings accounts, retirement funds, and emergency funds first rather than other expenses (such as groceries). When you get in the habit of paying yourself first, you’re not only boosting your wealth, but also limiting yourself from frivolous spending on pay-day.
Not Saving Early or Enough
According to Time Money, 33% of Americans have yet to start saving for retirement. This means 33% of Americans are missing out on the power of compound interest they would have incurred had they saved a bit of money at an earlier age. The earlier you start saving, the more time your money has to compound!
For those who do start to save early, saving money can be a challenge, especially for those who are paying off student loans. While it’s great that you are able to save and pay down loans, consider raising the percent you contribute each year. Even 1% each year can make a difference!
Not Taking Advantage of Employer Retirement Accounts
If you’re lucky enough to work for an employer who offers a 401(k) plan, then you may want to consider taking advantage of the benefits – especially if they offer matching contributions. Matching contributions can mean free money in your account and extra money to compound, leading to more cash in your retirement years. Other than taking advantage of the free money offered with matching 401(k)s, contributions on a traditional account are made with pre-taxed dollars, which will reduce your taxable income!
Without a budget, it can be difficult to see where your money is coming and going each month. It keeps you from ignoring your spending habits and helps you stay in overall good financial standing. This goes back to “paying yourself first.” Within your budget, you may want to include how much you will be saving that month, this gives you an understanding of how much you have left to work with for your bills and other expenses. If you need help budgeting, check out our detailed and easy to use budget tool called Budget Jewel.
Not Keeping Savings Separate from Spending Money
One problem people face when saving money is not separating their savings from their spending cash. They may have the accounts linked or may only have one account. This makes it way too easy to dip into one of these accounts when you’re running low on cash. For example, if your emergency fund is linked with your spending cash, there’s not much (besides your own will power) keeping you from transferring money from savings to spending.
Try not to treat saving like a chore. Saving money isn’t always easy and some months will be harder than others. Of course you would rather spend your hard earned money on something nice but you’ll thank yourself later. Curb these common mistakes and your retirement savings will reap the benefits. Are you saving for retirement? When did you start? Feel free to leave your comments below.