Best Advice for the Greatest Savings Possible

There is one question I hear more as a personal finance writer than any other. It’s not how to gamble in the stock market or become a billionaire – it’s just how to make the budget work while still keeping enough savings to comfortably retire.

And of course it’s simple: change your habits so you can save money for what matters to you. But this is really very difficult to do.

This is because understanding personal finance is a difficult task for many Americans. We are not taught the practicality of money in school because the truth is that many industries profit from our ignorance. Although wages have barely changed over the past decades, shareholders and CEOs have never been wealthier. The cost of living in many major cities is prohibitive for everyone except the super privileged or those willing to take on large debts or make huge sacrifices. While the stock market is skyrocketing, only 52% of US adults actually owned shares in 2016, according to Gallup, and the richest 1% of families owned 38% of all shares in 2013. The government is actively working against consumers to make this process easier. financial institutions prey on their citizens, and one health bill can send a person into debt for the rest of their lives.

All of this is true, and it makes it easy to feel cynical and think that you can never get ahead. But it’s also true that you need money – you have to set dinner tonight, fund your child’s $ 529, and perhaps take a vacation at some point. So what can the average person actually do? There is no single formula that will turn everyone into a millionaire, but here are the main points that I try to keep in mind:

Know that success won’t happen overnight.

People are nearsighted and it is never easy to make any real and lasting changes in their habits. You will have a few setbacks, and that’s okay.

Knowledge is power.

Take your time to make any decisions and always consult a second (third or fourth) source. When it comes to money, people will do their best to get as much as possible, no matter what that means to you.

Automate whatever you can (assuming you have enough funds to cover the bills and don’t charge any overdraft fees).

Especially automate your retirement savings. The less we need to think, the better (see The work of the behavioral economist Nobel laureate Richard Thaler).

Reward yourself.

Unless you’re superhuman, you probably can’t give up all the pleasures on earth in order to save as much as possible. And you shouldn’t – life is short, enjoy it.

I also asked some of my favorite writers (and my personal nemesis ) for the most basic personal finance advice. Here’s what they say about their money, and this is the most important:

Heline Olen, author of Pound Foolish and co-author of The Index Card

Our personal finances do not exist in a vacuum, and we are not alone in solving them. They are the result not only of our own actions, but also of the larger economy, government legislation and regulation. The Trump administration is currently in the process of lifting any number of consumer protection measures, and is also pushing forward any changes that will complicate matters for many student loan borrowers. Republicans in Congress are buzzing about welfare cuts. These are all as much a part of your finances as how you spend and save your paycheck. Learn and talk. Call your members of Congress and let them know what you think.

Taylor Tepper, Financial Planning Analyst at Bankrate

You want to make as few decisions as possible. You know you need a contingency fund, so automate. Do the same by increasing your 401 (k) contribution each year or by paying off your credit card debt. You have a lifetime to lead and you want to spend as little time as possible on the basics of your finances.

Train yourself not to adapt. Before starting your career, you have the idea that if I just make a certain amount of money, I will become great. But life doesn’t really work that way. You are constantly adjusting your spending and lifestyle to your income. You get a raise, so you buy a bigger house. If you’re not careful, it can cause a lot of problems. Among those with credit card debt, the richest are in debt. So be careful with your spending, even if you suddenly make more than you thought. You will also be unhappy if you chase the temporary pleasure for dollars. Try to live slightly below your means than above.

Nicole Dicker, senior editor for The Billfold (and writer for Lifehacker )

The smartest thing I have ever done financially was the decision to set aside a percentage of every paycheck. I started by depositing 10% (before tax) of every freelance check I received in a savings account, and this year I increased it to 15%. I also save 30% of my freelance income for taxes, and sometimes it’s frustrating to think that “out of every $ 1000 I make, I can only spend $ 550” – but trust me, the savings are worth it. I fully funded my Roth IRA, I was able to cover the large contingencies and I am confident that I have a cash buffer for future emergencies / unemployment / etc.

Chris Taylor , senior money correspondent for Reuters Money

The Roth IRA is my favorite retirement car, without exception. Since contributions are paid after taxes, this means you can look in your account and know that every penny (including earnings) belongs to you forever and is not taxed. Nice feeling. This is especially useful for younger employees, many of whom are freelancers or independent contractors and likely do not have access to a 401 (k) s company. So make your contributions as early as possible, increase them each year as long as you can (the current annual limit is $ 5,500 or $ 6,500 for those over 50) and you can sleep a little easier knowing that with your retirement it will probably be all right.

Maria LaMagna , Marketwatch reporter

Sometimes it’s hard to stick to a budget – it’s so hard that two-thirds of adults don’t write it out at all. I fall into this category. But I am keeping up with my finances (most of the time) because I have simplified money management for myself.

Automate as many methods as possible to save and track your money. Set up an automatic deposit to your retirement account, whether through your employer or one you have created yourself.

Once you’ve done that, arm yourself with a lot of great tools. One of the best tools I’ve tried is Clarity Money, which tracks your spending by category to help you stay on track. Previous apps I’ve tried were imprecise or difficult, but it’s well-designed. It has the ability to set up an automatic deposit to a savings account if you like.

I also use Acorns, an app that puts your extra money into exchange-traded funds (ETFs). If your investment is less than $ 5,000, it will be worth $ 1 per month. If it is more than $ 5,000, it is worth 0.25% of your investment. But it’s easy to recoup your $ 1 monthly cost with Found Money, Acorns’ affiliate program with retailers, which gives you money back into your Acorns account.

There are even more automated savings and investment tools that I haven’t tried. Betterment and Personal Capital are two high-profile online robotics consultants. Digit is an application that automatically saves money from your checking account, but does not invest it. It costs $ 2.99 per month after a 100-day trial period. Test a few applications and see what works for you.

Ron Lieber, columnist for The Opposite of Spoiled and Your Money in the New York Times

Four things to add:

1. I started early. The longer your money and investments have to grow before you need them, the more money you will have, all other things being equal. Every little thing matters if you need to develop the right habits.

2. I put myself in the right place from a geographic point of view. I’m Chicago through and through. I was raised to believe terrible things about New Yorkers. But it was here that magazines and books were published, so I pinched my nose and moved.

3. I did side movements. Books, freelance writer, speaking, any job I could get my hands on. It was the only way to scrape together 10% of the down payment on a one-bedroom apartment one long block from where the cool guys lived.

4. I’m lucky. So, so lucky. I stayed healthy, I didn’t have family members who needed money, and I didn’t have long periods of interruption in income. I couldn’t control any of this. But I would have had no luck with real estate or investments if I hadn’t started saving earlier (1.) and moved to a city (2.) where my chances of meeting people who will help me make more money were higher (3.).

Update 12/13/17: Added advice from Maria LaMagna and Ron Lieber to this post.


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