Habits of Successful Savers and Investors
Written by: Kristy Welsh
Last Updated: August 18, 2017
Have you ever met someone who retired comfortably at the age of 55 and wondered how he or she did it? Would you like to be able to retire early and have enough money so you don't have to work after you turn 65? If you answered "yes" to both of these questions but you think both scenarios are way out of your reach — think again. We have found some habits used by successful savors and investors that you can incorporate into your life so you too can retire early and have enough money to live on for the rest of your life.
Try to Live Below Your Means
The first habit of a successful saver is to live below their means. To put that in simple terms, trying to "keep up with the Jones's" is not what you want to do if you want to be successful at saving money. To be a successful saver, you must spend less than you earn on a consistent basis. It may take some real effort on your part, but you need to make sure month after month, you are not spending more than you are bringing in. Spending beyond your earnings equals debt. Besides accumulating more debt, you also run the risk of damaging your credit if you overextend yourself and fall behind on your payments. This can also lead you down the path of borrowing more money - you can see where this is all going. It is a bit of a snowball affect that can get out of control very quickly. Bottom line here, don't spend more than you earn and make sure to put aside money at the end of each month into a savings account for future goals.
Plan For Emergencies
Successful savors and investors know that financial emergencies happen and they have set aside money for these occasions. This strategy goes hand in hand with the habit above. Putting aside money each month (into a savings account) for any emergencies can only be done if you are not living above your means. A good rule of thumb when setting money aside for an emergency is to save 3 to 6 months' worth of living expenses. But if you can't swing that much money, having a couple thousand dollars tucked away in a saving account can make a big difference when a large financial expense come your way.
Stick to Your Saving Goals
The key to successful saving and investing is consistency. Stick to your saving and investing goals each and every month and year after year. Stay within your monthly budget and you will have the extra money to put away in a savings or an investment account. Once you know what your future financial goals are you can make a plan but importantly, you have to stick to it. As the months and years go by, reaching these goals will become second nature.
Pay Yourself First
Successful investors and savors put their saving goals first, before anything else. But what does it mean to pay yourself first you might ask? Before any money from your paycheck goes anywhere, put aside 10 percent of it into a savings or investment account. Depending on your income and other financial obligations, you might even be able to sock away 25 percent. Get into the habit of saving first — as soon as your paycheck hits your checking account, pull out your allotted amount and move it into your savings or investment account. This can be done easily in a number of ways:
- Set up an automatic withdraw with your checking account into a separate savings or investment account.
- Join an employer's 401(k) plan and have pre-tax money set aside into this account.
- Open up an individual retirement account (IRA or the like) and have money put in automatically.
All of these habits we presented in this article take planning and execution. Successful savors and investors think ahead and do not live just for today but plan ahead for tomorrow. Putting financial capital toward savings and investing will come in handy at a time of crisis or at the time of retirement. When you get into these saving habits, after a while, they will not seem difficult at all but just the way you live.
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