Building Wealth Starts with Savings

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Wealth Starts with SavingsI am sure we all know the importance of saving our money.  It is talked about over and over again.  I showed an infographic last year about the savings drought in America. That infographic is a huge reason why I save my money.  Though we talk about saving our money over and over again, people still don’t do it.  So, instead of trying to push the savings talk down your throat, I am going to give you some options to start saving your money.  These are going to be how you can save money and where you can do it.  To make it easy, I will only talk about simple savings products, along with some simple retirement savings.  I think these are important factors in order to start building your wealth.  Just remember this…

Wealth Starts with Savings

You CANNOT build your wealth until you start saving your money.  It just doesn’t happen.  If you have no money in your bank account and no assets, then you have no wealth.  If you have assets, but no liquid money, then you have wealth, but it is volatile.  In order to increase your net worth and get on the wealth bandwagon, you need to start socking money away.  Plain and simple.  Here are some ways to do it and where you can start.

Save by Paying Yourself First

This is a common savings technique. You have probably heard everyone telling you to pay yourself first.  It is a good motto.  Though I think it is good, I don’t follow it. I will describe my process of saving after I talk about this.

Paying yourself first is simple.  Whenever you get paid, you need to put some of that money into your savings account or investments.  No matter how you get paid or when you get paid.  If you get paid twice a month, then have the money transferred into your savings account on those days.  If you are paid on an off schedule, then whenever you receive that money, take some and save it.  You can choose to take just a percentage of your income and save it or you can go with a set amount.  Say 10% of all income or $100 per paycheck.  The numbers will all differ from person to person, but the concept is still the same.

Treat Your Savings Like a Monthly Bill

Here is my tactic which I use every month to save money.  Who likes to pay bills?  No one!  I sure don’t, but I do it anyway.  When you don’t pay your bills, you get in trouble.  Your credit score can suffer or you can go into collections.  You can lose your home, your car, or your electricity can be turned off.  No matter the service, you have to pay to keep it.  Simple concept right?

I noticed over the years when paying down my debt that I worked really hard to make sure all of my bills were paid.  After that was done, I really didn’t save any money. My main focus was keeping on top of my bills.  One day I decided to start saving money when paying down my debt.  In order to do this, I needed to take a different mental approach.  I needed to treat my savings like a bill.

One a specified day each month, I transfer money into my savings account.  I have this “payment” setup in my bill manager and I keep on top of it.  If I don’t pay the bill on time, then I charge myself a late fee.  Yep, I charge myself a late fee.  It only benefits me, but it still hurts when I have to pay it.  The reason is I don’t like to touch my savings. I don’t even recognize it when I am looking at my available cash.  If I am late, then I need to pay a late fee. Plain and simple.

Start Saving With an Online Savings Account

You might remember the day when your savings account could earn 4-5% in interest.  That was a great time.  It was a perfect idea to stock some money away in your savings account as it grew nicely.  Now, most traditional banks are ranging around 0.10%.  Yes, that is close to 0%.  Yet, when they loan you money, they charge you 6-7% interest and get to pocket the rest.  Doesn’t that suck!

In an effort to get around this, I decided to go online.  I opened a savings account with Capital One 360. They are offering a much higher rate and they make saving easy. You can have as many savings buckets as you want. This helps you set goals. You can setup transfers from your regular checking account right into your Capital One 360 savings account.  The best part is there are no monthly fees and it is free to join.  You can read my review of Capital One 360 to get more information.

I also recommend checking out a local or national credit union.  There might be some barriers to signing up as you have to be a part of specific groups, but that have never stopped me. I get some of the best rates through my credit union, Alliant Credit Union.  I use them for most of my money.

Save for Retirement with a Roth IRA

When I started my job, I got a 401K.  I realize the power of investing for my retirement. Most people will not have enough money in their retirement savings if they don’t invest in some ways.  What I learned is my 401k was not very good. There are only a few options to choose from and the management fees are high.  In light of this discover, I decided to open a Roth IRA.

What a Roth IRA account does is allow you to contribute up to $5,500 post-tax money for the year.  This means your money has already been taxed, so you will not be taxed again.  The power of this type of retirement investing is you get to choose from great funds and you can open an account at many different places.

Open a Roth IRA with E*Trade

One of the big deciding factors for me was the ability to take out my contributions at any time.  With a Roth IRA, you can withdraw your contributions at any time with no penalty.  This means you can use this as an emergency fund, but with the power of stock market earnings in the background.  You cannot pull out your earnings without facing a penalty though.  Roth IRAs can be great to add on top of a 401k if you meet the income requirements.  Most people will.

Saving money doesn’t have to be difficult, but I hope these tips will get your started on building your wealth.  You can’t start until you save your money.  Sorry to be the bearer of bad news people, but honesty is my forte.  Get on the wealth train and get to saving!

 

What is your favorite way to save money?  Do you have an online savings account or a Roth IRA?

 

Image via brettneilson

 

 

*This post was featured on Smart Budgeting, Millennial Cents, My Life I Guess and Student Finance.

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21 COMMENTS

  1. Savings is truly the key to long term wealth and success. It doesn’t matter how much investment returns the market is getting, if you have nothing to invest, then you aren’t going to get anywhere. I love the idea of making saving a monthly “expense.” When I work through financial plans for clients, the savings category is the first one that gets priority, then we build around the monthly budget from that point forward.
    Shannon @ Financially Blonde recently posted…You Can’t Win Them AllMy Profile

  2. I was reading an article the other day that was saying forget saving for retirement, save for emergencies. The ultimate point was that many aren’t doing even the very basic of saving for emergencies. Anywho, I treat our savings like a bill as well. We have some income we can count on each month and on a given day during the month I go and transfer money to different things we’re saving for. It helps me keep it straight and do it each month, just like any other bill. Great idea on the late fee! I should do something like that too.
    John recently posted…Finding a Balance Between Saving and SpendingMy Profile

    • While I wouldn’t want to agree with that, I understand it. Most people can’t even save any money, so why tell them to save for retirement. They will most likely never be able to retire. That is really sad, but true.
      Grayson Bell recently posted…The Success MindsetMy Profile

  3. I had a great twitter discussion with Matt Theriault (theDoOverGuy) this week about his belief that you should stay away from 401k and IRA plans….and that saving in general is a horrible idea. His thought? Buy income streams whenever possible and add to them. If you can buy a real estate property that puts money in your pocket and that’s it…..that’s all you should do.
    Joe Saul-Sehy recently posted…Creating the Pitch-Perfect Budget – with The Budget MamaMy Profile

  4. I treat my savings like a bill every month – I’ve found that I save more money this way. I tried the automatic savings approach, but I was always nervous that something unexpected would pop up so I would put a couple of hundred dollars less than I knew I could save to give myself a buffer. Now that I treat it like a bill I can throw everything I have at it and BOOM – I have more money saved every month.

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