Consider setting a goal to save 10% of your net income this year
Saving money is a time-tested way to improve your financial situation over time. It can give you more peace-of-mind today, and get you started down the road towards a comfortable retirement, a college education, or family recreation.
A good rule-of-thumb is to save 10% of your net income each year. This makes financial sense for lots of reasons, but for three in particular:
1) Helps you create an emergency fund
2) Can provide funding for opportunities that may arise
3) Gets you into the habit of long term saving
An emergency fund is an amount of money set aside to buffer you against financial surprises. Whether it is a job loss, health emergency, or car or home repair, an emergency fund can help you cover unexpected costs and not interfere with your other financial goals, or worse – having to take on unwanted debt. Target an emergency fund equal to about 6 months of salary.
We’ve all been in this situation before: something great presents itself but we don’t have the ‘cash on hand’ to take advantage of it. Be it a business opportunity, an extended vacation, or a new, low price on something we’ve always wanted, the opportunity often gets missed for a lack of funds. Money set aside through regular savings can be used for just these opportunities; especially those that can help you reach your financial goals.
Regularly saving money helps you build good financial habits. Saving and budgeting can lead to better expense management. Set up a direct deposit with your employer to have an amount of money directed to a separate savings account each pay period. And look at your expenses for potential savings opportunities. Some expenses can be minimized or eliminated, allowing you to redirect those dollars towards savings.
Money, simply put, is the means to achieve your financial goals. Building good financial habits today is the best way to help ensure you have the money you need, when you need it. Whether your savings goals are big – college tuitions, a new home, a comfortable retirement – or more modest goals – a family vacation or a new car – building good financial habits now can help you reach both your short- and long-term goals. And you can get started building those habits today:
- Organize your financial information and records
- Prepare a household budget
- Analyze your spending on a regular basis, and review monthly bills for accuracy
- Continue to educate yourself (and your family) about finances
Track and share
To save 10% a year, you need to save about 10% each month on average. To make sure you stay on track, check your progress every month to ensure you are sticking to your plan. Keeping close tabs on your monthly savings will also help you identify and solve for any problems that may arise.
Saving money is a long term commitment, and one that is often best realized through confidence gained by small achievements. And as you reach your savings goal each month, consider sharing your accomplishment with friends and family.* Many times, support, encouragement and reassurance from your loved ones can go a long way in helping you reach your goals.
For additional information on savings and good financial habits, spend some time with your MassMutual financial professional. They will be able to help you with one of the most important financial habits there is: continuing to educate yourself.