If you graduated in May just like I did, you have probably been working for 1-2 months now. After one month and a half of working for (insert company name here) you probably already have a routine, and have also developed some habits. If you catch yourself getting coffee 2-3 times a week, buying lunch every day or spending too much money on the weekends, either way it is important that you include it on your budget. Budgeting requires discipline and being honest with yourself so you can hold yourself accountable. I love coffee and get coffee around 4 times a week, so I have to make sure I include those $64/month in my budget. I used to tell myself I was never going to get coffee because it was expensive but I would still ended up getting it 2-3 times a week. That was even worse! Because I wouldn’t budget for it and would end up spending more money than if I had budgeted for it and restricted myself in other things. So I ended up saving a lot less than I wanted. It is a good time to start thinking about what’s next, in terms of financial goals. While I was doing some research, every single article about financial health started with SAVE MONEY. Most of the articles I read are geared towards millenials because I believe we have different financial needs, motivations and lifestyles than older and younger generations do. However, the recipe for success always includes saving. That way you won’t be living paycheck to paycheck or overusing your credit card. It doesn’t matter what your goal is, it could be buying tickets for a concert, to vacation, buying a car, buying clothes, saving for a house, or retire at age 50. If you don’t know where to start don’t worry start by following these simple steps.
1. Make the decision to save only once
You get a paycheck once or twice every month, when you get your payroll deposit you can probably think of at least 5 different better ways to use your money. If you enroll in an automatic money transfer from your checkings to your savings you will only have to make the decision of saving once. That way you won’t let the heat of the moment or your current situation affect your savings account. You will benefit from putting that money in a savings account because savings account charge a fee if you want to withdraw money, and have higher returns, that way you’ll be more motivated to keep your money in it.
2. Consider saving 30% of your income
As a general rule of thumb if you don’t have any debt it is recommended that you save 30% of your yearly salary. If you are paying off student loans it is recommended to pay more to your student loans and save around 20%. You should take these two percentages in consideration whenever you are creating a budget so you cut back on some unnecessary expenses. You can probably think about 2-3 things you shouldn’t be spending money on.
3. Saving doesn’t only come in the form of a savings account
Saving can come in many shapes and sizes, like health savings plans, CDs, 401(k)s, Roth IRAs, etc. Some companies match your monthly savings and/or contributions to retirement accounts (the first is more common in Mexico and the latter in the US). Always save and/or contribute the highest percentage your company is willing to match, if you aren’t you are literally throwing away free money. You don’t have to commit just yet, but this is a good time to start doing some research about saving options.
4. Start saving for retirement
Start by checking out this website it will put everything into perspective. It will show you how the power of compounding works. It does make a difference if you start saving at 22 vs. if you start saving at 26 and even more if you start saving at 30. And even though retirement seems like a long way from now if you want to retire at 50ish you should definitely start planning for it.
http://money.cnn.com/calculator/retirement/retirement-need/
Unfortunately if you are reading this from Mexico, retirement accounts don’t work the same way they do in the US. So before you decide on investing your money on a mutual fund, or whatever it is that you want to buy for the long run, I would recommend opening a savings account specifically for retirement and out of the 30% destined to savings put 10-15% of your monthly salary in your “retirement account”.
I hope you find this helpful and please let me know if there is anything I can do to help!
For more information check out these links:
- http://www.kiplinger.com/article/saving/T063-C006-S001-10-financial-commandments-for-your-20s.html
- http://time.com/money/collection-post/4083714/retirement-moves-20s-30s/
If you missed my latest blog post on Budgeting go check it out.
Finding My Purpose 