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How to Change from a Spender (100|0|0) to a Saver (80|10|10).

How to Change from a Spender (100|0|0)  to a Saver (80|10|10).

So what’s with all of these numbers anyway?

The spender can look something like this: 100 | 0 | 0

Live” with 100% of your monthly income.

Save” with 0% of your monthly income.

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Give” with 0% of your monthly income.

And the saver can look something like this: 80 | 10 | 10

Live” with 80% of your monthly income.

Save” with 10% of your monthly income.

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Give” with 10% of your monthly income.

So what are you: a spender or a saver? If you are like me, you are probably somewhere in between and your significant other is unlikely to have the same numbers as you do. There is some math to this, so be prepared to have pencil and paper in hand.

The challenge is to change your numbers so you will never revert back to being that “spender” ever again! Change your numbers gradually by a small percentage (1 to 4% each quarter) and in 8 quarters (2 years), you will be where you want to be!

Let’s start by doing a reality and motivation check.

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The reality of our culture is to collect “stuff.” George Carlin, the late comedian, had a comedy sketch that nails this. George did not always use delicate vocabulary, but he sure could make you remember his point.

Our motivation to be a saver (and not a spender) is weakened by our desire to live in “ATM” mode. We like the freedom (but not the responsibility) of getting anything we want whenever we want. The secret here is timing. Go ahead and plan to spend what you want—but not all right at this very moment. Take your time (the rest of your life) doing it. The more you think about the value of your spending, the less money you will need to acquire the lifestyle that you want. It is also a sustainable approach, and that will motivate you to spend “wisely” and not “quickly!”

Say you go out to a flea market and buy a thing-a-ma-jig for almost nothing! What a great purchase, right? You put it in the garage (where the car could go)  and 3 years later you realize that you haven’t used it once. You decide to donate it to Good Will and at least recycle it.

Three years ago you also spent some serious coin on a really nice self-propelled grass mower because you have too much green on your property. You own two blades and you keep them sharp which helps you get a clean cut on your lawn. You now have to buy another one because you just plum wore the thing out. Now which was the better purchase?

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Well, now it’s time to do this spender-to-saver conversion plan, so let’s get organized. There are three steps that will get you on the road to abundant living.

  1. Track your debt and start eliminating outstanding balances.
  2. Live below your means. You can do things to reduce the cost of living AND increase the quality of your life.
  3. Save using a three bucket accumulation plan, sequentially at first and then concurrently, once you are in the savings groove.

First, go here to download your complementary copy of your Debt Trakker. Complete ALL the debt metrics because you need them to decide what to pay minimums on and what to target as your first debt victim.

Second, go here to download your complementary copy of your Budget Master. This organizer is a real eye opener and will tell you two things. It will show you where your spending makes you feel bad and where your spending makes you feel good. And I’m NOT talking about how much “stuff” you are accumulating along the way. Keep working on it until ALL your spending makes you feel good. And spending includes saving and giving.

Third: now it’s time to do your lifetime planning. Click this (Cash Flow LifeLine & Three Bucket Savings Plan) and download your handy-dandy worksheet and map your future. It gets you started on your savings path that includes cash reserve, non-retirement savings, and retirement savings.

You will start taking debt payments (once you pay off balances) and convert them into savings and giving payments. Start by fully funding cash reserves (6 months of monthly expenses covered between bank savings and unused credit lines). Then start saving for non-retirement items such as cars, homes, education, dental, eyes, vacations, remodeling. Once your cash reserves are in place and some non-retirement savings are accumulated, then you can start to fully fund retirement. You should have assassinated your debt balances by now and could have more monthly cash flow to fund your future. Remember that you are likely to live longer than you think, so go crazy with your savings. And, for the record, savings IS future spending!

Plan to spend it all, but not right now!

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

Reference

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