How to Jumpstart Your Savings This Year
Financial security is on top of everyone’s list, coming into the New Year, probably next to losing weight. And it is a worthy goal, especially looking at the statistics:
75% of Americans have less than $30,000 in savings, Americans aged 55 and older account for 20% of all bankruptcies and 1 in 6 older Americans live on less than $22,500 a year.
You can make changes now to make sure you are never part of these alarming numbers. Here are five ways to jumpstart your savings this year and create wealth into the future.
1. Build your emergency cash savings
Apart from your savings, create an emergency cash fund. This should be dedicated to one thing and one thing only- emergencies. And this does not mean a big sale or a birthday. You should only tap into this money in the event something financially life-changing, such as a job loss or catastrophic medical bill, hits you. Ideally, you should save six month’s worth of your income. Start slow – aim for a month’s worth, and build upon it. Save the money somewhere that you cannot withdraw it immediately.
2. Save up for large expenses.
An emergency fund is for unexpected bills. For the expected or planned ones, you can save up to cover yourself financially. Look at what is coming your way within the next 12 or 18 months. Write all the numbers involved and figure out how much you must set aside each month to meet these needs.
3. Maximize your employer’s matching program to your 401(K).
It is not as common anymore, but employers may match up to 50% of the first 6% of your income saved. This is essentially free money. Invest in it and make it a part of your long-term, retirement plan. Think of it as free money. Sure, you can use the money now, but look at the bigger picture and allow yourself to build wealth for the future.
4. Start funding a Roth IRA.
Any extra money that you have should be placed into savings. If you have not already, open a Roth IRA this year. Contributions are made with after-tax dollars and they can be withdrawn anytime without penalty. There is no mandatory distribution age. All withdrawals are tax-free once you hit 59 and a half years old.
5. Max out your 401(K).
Once you have fully funded your Roth IRA, aim to max out your 401(K), too. The maximum contribution last year was $19,000, plus an extra catch up amount of $1,000 for people aged 50 and above. Save the money now and you are sure to live happier and more comfortably in the future.