Wednesday, January 27, 2010

Limited on $? Prioritize on what matters to you...

I like planning to have money to retire on. For some, it's not their priority, so they choose not to do it yet. But at some point you have to formulate a plan and act on it. The simple truth is the sooner you start, the easier it will be to save.

With that said, I had a tough time getting started with my own savings. I started my first Roth IRA in 2004, and it was definitely a sacrifice at the time. Looking back on it now though, I'm glad I did not squander every cent I made when I was younger. I spent money on a lot of stuff I didn't need, and learned a lot of lessons about money. I owe much of my knowledge to my family letting me make my own mistakes. I especially thank my grandmother for not strangling me as I learned these lessons, sometimes at great expense. I learned through my mistakes and began to realize that I could never improve my situation by spending more than I earned. For a long time, I felt lost when it came to my personal finances.

If you are working on your finances but don't know where to start...try prioritizing what is important to you.

What was the spark that led you to start looking at your finances?

Some common ones that have helped me stay on track:

1. The never ending treadmill of debt. This one can be so frustrating as many small purchases do add up, and compound interest never treats you well when it's working against you. Turn it around by paying off your debt, and then make it work for you by saving and investing.

2. The ease of spending. The simple truth is it is easy to spend money. Whether it is cash, credit, layaway, or's way too easy for companies to make you part with your money. Think of the one goal of all advertising, and what you get is someone who wants your money. If it helps to motivate you to stop spending, think about how all the CEO's get their own airplanes/houses/cars. While we may not ever have any of that, you can use that as "ammunition" to keep you fired up about saving. At least if you try to reign in your spending you can progress onto other financial goals.

3. The suck of saving. While talking to some friends about saving, the subject of the amount needed to provide cash flow in retirement comes up quite a bit. Don't focus on how much you think you will need in the beginning. If you look at a big number, you are probably discouraged from starting in the first place. Try thinking instead of how you can start saving $20 per paycheck any way you can. Move on from there, and continue snowballing your efforts so they continue to improve. Small changes can bring about great things.

4. The amount of your income limiting you from doing what you want. This is a huge one. I have heard friends say "I don't make enough to save anything!" or "Maybe next year when I get a raise." There are a few things to think about when you are thinking your income limits you from saving. There is always a sacrifice to get the things we want in life. If we don't go to work, we don't get a paycheck. Think of your job, and then think of your goals. One should be to provide solid plans for you and your families future. If that means you need to grab a part time job to help out for a while until things "get better" then so be it. Just be sure to keep your eye on your goals when you do bring that extra cash in. It is much too easy to be "tricked" into spending more just because you have a little extra income.

These are a few examples of what may have gotten you to the point of reading a blog on this subject matter. Take a look at what bothers you about your situation and try to fix it. It usually won't be a quick fix, but it will pay off!

1 comment:

  1. Yeah, stop buying your kids Ed Hardy t-shirts and put that money into retirement

    =) Simple as pie.