It's What You Keep, Not Only What You Earn
What if we told you to increase your savings 10% per year?
It seems like a lot. But let’s look at the numbers. Say you’re saving $300 per month. Ten percent of that is just $30. Would you even notice that additional amount?
As your income increases, so does your ability to achieve your financial goals. Think about your annual cost of living increase (and ideally, a raise) that is a percentage of your gross income. Even 1-2% of that could make a substantial increase in your savings! It’s a good idea to make sure your saving keeps pace with your income, because even a small increase can significantly increase your net worth over time. Always view these seemingly small changes in the context of what they could mean in the future.
One thing is for sure. If you don’t regularly increase your saving, it’s a sure way not to grow your net worth.
If a 45-year-old retiring in 20 years saved $300 per month, it would add up to $72,000 at age 65 (not counting any investment growth). But if that person increased savings 10% each year, the total savings would be $206,190 by age 65, a difference of over $130,000!
Now, as the annual saving amount gets larger and larger every year, you may not be able to do a 10% increase. In the above example, the saver would be putting away $22,017 in the 19th year. But when you get in the habit of just saving a little bit more every year, and your income rises, it makes that big number seem more attainable.
We always advocate automating as much as you can in your financial life. This includes electronic transfers to your savings account, investment account, college 529 plan, etc. But “automated” isn’t the same as “set it and forget it.”
The start of the year, when annual raises or cost-of-living increases come into play, is a good time to review your saving. The recent tax cut may give you further opportunity to put extra cash to work for your future. However, any time of year is a good time to take the reins and control the path to your dreams. Saving more is a “return” completely within your control—and one that has the potential to grow even more over time via investing.
So look at your savings this month. Has it been a few years since you accelerated your progress toward your financial goals? Seize the moment today! It is all too easy to fall into the trap of inertia and missing the opportunity.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Halpern Financial, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Halpern Financial, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Halpern Financial, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Halpern Financial, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.