For some persons, trying to save money when it seems that there is never enough, is almost like an impossibility. It can sometimes feel overwhelming, with all that’s going on around us. We all know that we should be saving, But!!! How do you really know if you are saving enough or at least on the path there.
Here are a few markers which we can use to help us figure out about our saving.
Here’s How to Tell! Saving money is one of those topics that can sometimes feel overwhelming, right? We all know we should be saving, but how do you really know if you’re saving enough? Let’s chat about a few markers that can help you figure it out.
Get Your Emergency Fund Ready
First things first – Do you have an emergency fund? A good rule of thumb is to have enough saved to cover a few months of living expenses. Some persons believe this should be at least three to six months’ worth of living expenses.
If you’re already there, that’s a huge win! It means you’re prepared for unexpected costs like medical bills or car repairs. Along with this, persons would have had the experience of the Covid Pandemic, which brought the need for having some sort of fall-back plan.
If this one has not yet been started, it might be time to focus your efforts on building that cushion. The key here is to start putting something down but – Do Not Touch… Label this account as such…
What Goals Do You Have In Sight?
What about your short-term and long-term savings goals?
This is one question which should be on our mind as well as within our plans. Do you have plans for any big purchases? At some point in time you may be considering owning a home or property, maybe a wedding, or a vacation? This may even evolve into all of them.
If you’re actively saving towards these goals, you should then have a clear and direct plan in place.
This would indicate that you are likely on the right track. Make sure your savings strategies align with what really matters to you. This is one of the times where you should also focus and relish in the experience and the end point. Additionally this builds discipline in your game.
Retirement Contributions
Are you contributing to a retirement plan?
For many persons, retirement may seem like a few decades away, and therefore they may think that there is plenty of time to do more important things right now. However the best time to start planning for retirement is back in your 20’s however if you missed that, then get going now!!
If your employer offers a 401(k) match, try to at least contribute enough to get that full match. However if you are self employed or freelancing it might be wise to ask an investment advisor to create a payment facility to emulate the retirement plan. In other words there is no excuse.
Make contributions to an IRA, or to another retirement account. This then means that you are not just saving, but that you are investing in your future.
Debt Management
You should ask yourself – How’s my debt situation looking?
If you are consistently paying down high-interest debt while still managing to save, this is a solid sign. The creditors will love this as well. This also enhances your credit rating and score, meanwhile it also can be a reminder why we need to save as well. Saving can also help us stay out of debt.
Added to this is should the need arise that we need to borrow some money, the saving can be used as a form of collateral or to reduce the amount that may be needed in the loan.
Balancing savings while repaying debt can be tricky. Sometimes we may have to decide which one is more critical as you do your weekly review. Ensuring that you are making progress payments on both fronts is key, so a little piece here and a little piece there.
Some persons classify their savings plan as a debt they owe to themselves.
Peace of Mind
How do you feel right now about your financial future? If saving enough at this point gives you peace of mind, and you feel confident about your finances, then you might be right where you need to be. This is done as you go through your budget and your weekly financial review of your progress.
However, if anxiety around your savings is creeping in, it might be worth it to reassess your savings strategy. There is also the support of having a trusted friend or advisor on hand to give an external and realistic perspective. This can reduce any cognitive bias which we may have of ourselves and the journey.
So, are you saving enough? Just take a moment to reflect on these few key markers, at least to get going. It is also important to remember that everyone’s financial situation is different. There is no one solution, and the percentage of each of these key suggestions here may be different for each person.
Life is also dynamic and you have to adjust as your life situation changes.
