Three Ways To Re-Build Your Savings
Many people are struggling with regards to income these days. Perhaps, you did not get a bonus or a raise this year, perhaps you even got a pay cut or maybe you even got laid off. Either way, your income might not be where you wish it were right now. Combine that with holiday shopping and other expenses and you might have blown through some of your savings; that is, if you are in the minority and actually had savings to blow through. No matter what your scenario is, I’m going to explain three ways to re-build your savings that I am currently implementing in my life. Hopefully, these methods will help you as well.
Get Serious About Your Budget
The most important thing you can do to re-build your savings is to get serious about your budget. If you don’t have a budget, make one. Then, stick to it no matter what.
It’s time to cut out some expenses. I guarantee you that there are things you can part with. As for me, I recently cancelled my wife and I’s gym memberships. I will be working out in my garage and running around my neighborhood to stay in shape. Also, I cut all the premium movie channels from my DirecTV package. The combination of both of these is over $100 a month.
Another interesting way I am considering to cut some expenses is cashing in my wife’s Whole Life Insurance policy and moving to some term life insurance. The premiums are drastically cheaper and we can keep the same level or higher of coverage on her.
Our plan is to always live on 80% of our income. We save 10% and tithe 10% each month. The next step will talk about how we aim to stick to this goal, even with less income than we have been used to.
Going All Cash
With a baby only weeks away, my wife is quitting work. This means we are only on one income. In order to ensure that we stick to a predefined budget, we are going to go all cash for a few months. We have found that it is very difficult to stick to our budget while using credit cards for all of our expenses. We never carry a balance, but by using plastic, the money doesn’t seem real.
Going from two incomes to one is a huge adjustment which calls for huge measures. Divvying up cash at the start of each month for various categories of expenses will help us realize how much money we are spending and have left for our expenses.
Going all cash will allow us to ensure that we stick to our predefined budget. With only one income from here on out, this is more important than ever.
Supercharge Your 401(k)
There is no better time than now to kick up your 401(k) contributions to as high as you can stand. First off, stock prices are significantly cheaper than they were a year ago meaning the money you put into your 401(k) will buy many more shares of the stocks or funds that they are buying. This is fantastic for long term growth (20, 30 years).
Second, your 401(k) is pretax contribution meaning the more you save, the less you are taxed. There is no better time to take advantage of this. Combine your 401(k) strategy with a strict budget strategy similar to the above two steps and you can put away significant amounts of money towards your future.
The compounding potential of money put away in your 20s is absolutely insane. Do it.