Start the Year by Giving Yourself a Raise
The past two years have taken a toll on many Americans' finances. As we move into 2022, here are some tips that can get your New Year off to a good start.
The best remedy for financial strain is a combination of two actions:
1. Minimize your spending. Trimming down a shopping habit is clearly the first step, but it's also in your best interest to consider cutting back on your bills. Check your subscriptions and cut back on anything you don’t truly need.
2. Ramp up your savings. Place every last dollar you save on monthly expenses into savings. Yes, it will be tempting to indulge on purchases you'd like to make. But remember, each dollar you save today is a dollar you'll have tomorrow. Treat your savings as a monthly expense. Just as you would never think of shortchanging on your rent or car payment, don't shortchange your savings account either.
Why It's Important
Making a considerable deposit into your savings account each month is just as important as making your car payment, paying your rent, utilities, and buying groceries. Without the security net of savings, you'll be living paycheck-to-paycheck for years to come.
“Nurturing your savings account is like giving yourself a raise,” says Gary Isler, Senior Vice President investments at David Lerner Associates. “This will give you a considerable amount of money at your disposal without having to work any harder. You'll be able to live simply now yet have the freedom to invest for your future.”.
The Savings Plan
Once you’ve paid all your bills, take 75 percent of the disposable income leftover and put that in your savings account. Do this each month without fail. Add to that the amount you’ve saved on your monthly expenses by implementing money-saving strategies.
Investing the Savings
Once you have a nest egg built up, invest it in a 401K if you are employed, or an IRA if you are an entrepreneur. That way you get the benefit of compound interest. [2]
If you feel you are not financially savvy, find ways to learn about money and investing. [1] Join an investing club, listen to podcasts, and read books. Improving your financial literacy is the best investment you can make in yourself.
This program does mean that you will have to make changes and spend less than you make. However, having a nest egg of investments that can provide financial security for you and your family will be well worth the effort. The long-term effect is more than worth sacrificing a few luxuries now.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.