This is contributed by Patricia Sanders.
According to a recent survey conducted by gobankingrates in 2015, almost 62% of Americans’ savings account is not fattened enough. They have less than $1,000 in the savings account that is not enough for securing financial future. The survey reveals that most of the Americans save a very little amount of money in their savings account. Cameron Huddleston, a personal finance expert said it’s an alarming report and it seems that “most of the American’s don’t have cash reserves to cover an emergency and will have to rely on credit, friends, and family, or even their retirement accounts to cover unexpected expenses.”
The survey result shows two-thirds of Americans don’t have enough savings
For most of the Americans, budgeting is challenging. As a result, they fail to save enough money in their savings account.
Why do people read several personal finance tips, but never become rich?
While the people who’re struggling with credit card debt often embrace personal finance tips. But the question is do they get good results?
Well, people tend to forget all the tips within a week and go back to their same old bad financial habits that exacerbate their financial woes. Everyone’s busy and they don’t have enough time to follow the tips after reading. People rarely take down the points so that they can’t follow it later on in life and this is the reason why they can’t become rich despite reading the personal finance tips.
There are some others who go through the personal finance strategies, practice them for a week and then suddenly feel that these tips are not made for them. Remember, no one is unlucky and unless you adopt the positive personal finance habits, it’s not possible for you to get enough results. If you think that you have no time to practice the tips in real life, then you’re just reminding yourself that you have no time to become rich. Only reading through the passive income blogs will not help you earn enough and save more unless you practice it.
Habits that can make you financially disciplined and help you save money
Following are some personal finance habits that you should adopt to become financially well off:
- Craft a frugal budget and follow it
Most of the Americans hate to follow the B-word ‘budgeting’, but this is probably the only way that can lead to a secure financial future. Yes, the basic rule of personal finance management is crafting a budget and following to it throughout the month. Most of the financial experts think the increasing consumer debt level is the result of people’s hatred towards budgeting. They said, following a budget is important to track monthly expenses and income. Thus, people can boost savings. Having extra money helps in repaying debt obligations as well.
- Spend less than what you earn in a month
When it comes to good financial habits, you always have to keep your expenses within your means. Remember, your financial health is just like your physical health. You have to maintain balance to remain healthy and wealthy. You need to maintain the balance between energy that you consume to remain healthy. Similarly, you need to maintain a balance between your earning and spending to remain financially secure. You need to struggle to defend against the temptations. Thus, you’ll be able to resist the temptation of spending more money than you earn.
- Prioritize to an emergency fund
No one can predict about the financial fiasco, if you want to stay safe, then you have to focus on building an emergency fund. There is no other option instead of saving at least 10% of what you earn, irrespective of the gross monthly amount that you make from your job. This is a valuable advice by the personal financial experts, but very few are into following it.
- Cut down extra expenses
Buying only the things that you need is one personal finance habit that most frugal people follow. But are you confused about the items that you can cut off to save your hard earned money? Well, you can save money on food bills by ditching expensive restaurants, save on groceries by using coupons and ditching branded items, and you must avoid getting things that are not on the list. Make sure you switch off lights when not using the room so as to save energy and electricity costs.
- Reduce using your credit cards as much as possible
Using credit cards gives you a chance to establish a good credit history, but misusing them can lead to a financial disaster. Stop whipping your plastics for purchasing the things that you can’t afford with cash. Because this is the reason most of the people fell into a credit card debt trap. Reduce the usage of credit cards so that you don’t require paying interest rates on the money that you owe.
- Start college savings plan (529 plan) for the kid’s education
Starting a college savings plan is an essential part of planning kid’s higher education. So, you must start the 529 plan to secure your child’s education future. Remember, 529 plans vary from state to state. You should be aware of your own State’s 529 plan to successfully save money for your kid’s education purpose. This way you’ll be able to minimize the risk of student loan debt as well.
Adding It All Up
By following the few simple tips outlined here, I estimate you can save about $100/month. To help you visualize what those sorts of savings represent, below are 2 scenarios created in OnTrajectory. The first shows someone who is 30-years-old making $45k per year. With their current spending level (and 3% inflation) they’re projected to run out of funds when they are 88.
The second image is the same person, but with spending reduced by $100/month. As you can see, they are fully funded to age 90 and have almost $150k remaining in savings at that age.
This demonstrates the huge benefits of saving small amounts over time, and why following advice such as offered here can be so critical to your financial future.