4 Ways You’re Sabotaging Your Savings

4 Ways You’re Sabotaging Your Savings

Do not save what is left after spending; instead spend what is left after saving.”

Warren Buffett

Financial security is more than making enough money—it’s saving enough to make it last.

If growing your savings is a 2020 goal, you’ll be ahead of the one in five Americans with no retirement savings at all (according to a study by Northwestern Mutual). And considering 44% of Americans are stressed out about money, sabotaging your savings is definitely something to avoid.

Money should be a source of peace and an avenue to the life you desire. We’re here to help you get there. The following are 4 money habits sabotaging your savings and how to turn them around for good.

1. Not Tracking Your Spending + Living Within Your Means

Having a budget is one thing, keeping a budget is another. Without tracking your spending, it’s impossible to know where your money is going and if you’re spending too much on certain things.

At the end of the month, it might feel like you have no money left, when in reality you do—it’s just being spent in the wrong places.

Tracking your spending doesn’t have to be difficult. There are plenty of apps that track for you and allow you to set spending limits. Not an app person? An excel doc works too!

Your next move: Explore tracking apps and download one that seems interesting. Commit to three months of accurate tracking. After three months, evaluate your spending and get real about where you could make changes (then make them!) PS: Your life should work around your savings, not the other way around. More of a paper and pen person? No problem. Click the link to download our Monthly Living Expense Worksheet which helps map out your income and outflow.

2. Not Paying Yourself First

Scroll back to the top of this post and re-read Warren Buffett’s quote. With a net worth of $87.3 billion, Buffett knows a thing or two about money.

And he’s right—saving should come before spending. Think of it like paying yourself first; ensuring your own security before handing your money over to the government or your favorite store.

It’s easy to think, “I’ll start putting money away when I have more of it,” but for long-term savings goals like retirement, your child’s college fund, a home, etc. waiting can be a big mistake.

When you wait, not only do you have less time to save, but you miss out on the power of compounding interest. For example, if you wanted to retire at 65 with $1 million in your account, and you started saving at 25, you’d need to stash away $425 a month (assuming a 7% annual return on investment). If you waited until 35 to start, you’d need to save $900 a month for the same $1 million. Waiting = losing.

Your next move: Start saving today and make it automatic. Aim for 10% to 15% of your income. If that’s impossible, start with whatever you can and increase each time you get a raise or fall into more money.

3. Not Paying Your Credit Card Off Monthly

Swiping your credit card instead of toting around mounds of cash is extremely convenient. However, the story doesn’t end when you swipe—it ends when you go in and pay for the swipe.

And if you’re not paying (in full) each month, your interest rate will come back and bite you in the butt.

Think of it this way: Each time you swipe your credit card you’re borrowing money from the credit company. They have to make money somehow, so they charge you a percentage to borrow their money. But if you pay them back in full each month, they won’t charge you anything extra—free borrowing. Why pay money for money? It’s a silly mistake millions of Americans make every day.

Your next move: Treat your credit card like a debit card. If you don’t have the money to afford your purchase, don’t swipe. Set up automatic payments each month to pay your balance in full and never pay interest again.

4. Not Purchasing Life Insurance

Death isn’t fun to think about. What’s even worse is the thought of your family without financial security when you’re gone.

Life insurance is something we invest in that makes no difference now, but a major difference later. Aside from creating peace of mind, it also: protects your family and loved ones when you’re no longer around, allows you to leave an inheritance—setting your kids up for success, and can pay off debts you leave behind.

Because it’s relatively inexpensive, there’s really no reason not to invest now. And you’ll sleep better knowing it’s there.

Your next move: Speak with your financial advisor about which type of life insurance policy makes most sense for you and your family. Then buy it!

Nearly everyone wants financial security, but few people are willing to do what it takes to get there. By choosing to avoid these mistakes and make the right money moves, you’re setting yourself up for success down the line.

Ready to dive even deeper and learn how to make your money work for you? We’d love to set up an initial (free!) consultation and talk about how we can best serve you.

Photo by Sharon McCutcheon on Unsplash