By:Michael A. Cibik
|First, maybe your goal isn’t $1,000 per month. It might be $500 a month-and it might also be a higher number like $1500 per month. What you need to save depends on your financial circumstances (income, children, years to retirement, other financial needs, etc.). But let’s call your “number” $1,000 a month for purposes of this discussion.|
Second, the key to saving-whether accumulating an emergency fund or saving for long-term goals like college or retirement-is paying yourself first. “Pay yourself first” is a principle I learned from my Grandfather over and over as I grew up. Grandpa accumulated a fairly large amount of money over the years, and he did that by keeping what he earned. He was an autoworker with only a 9th grade education who arrived in Flint, Michigan in 1936 to work for General Motors.
He came from a farm family in which he was the oldest of twelve children. Over the years, he worked for GM, and when he was not working that job, he prepared tax returns, installed furnaces, and did construction. He and my Grandmother, a wonderful woman, raised four children. And Grandpa had a saying: “Pay yourself first!”
Paying yourself first means when you get your paycheck, you immediately set aside money for savings goals. Back when Grandpa did this, he had to take money and put it in another bank account.
Today, at least for retirement savings, you can have your employer pay you first by having money taken out of your check. The idea is simple: You’ll never see it, so you won’t spend it. I call this “the garnishment method of saving.” You garnish your own wages, and that money goes into savings.
For other savings goals, you can accomplish the same thing by having the money automatically withdrawn from your bank account. Need an emergency fund? You’d be surprised how $100 per month can build up over a few years.
To recap: (1) You spend less than you make, (2) you must pay attention to the big expenses which can make it impossible to save, and (3) you must pay yourself first.
Michael A. Cibik, Esquire
If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.
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