We have all weathered economic uncertainty in the
last decade as financial institutions, companies and countries have stumbled,
struggled and are now working to stand back up. But even in times of relative
calm for the global economy, it’s not unusual to worry and wonder about your
own financial security.
Financial stability, apart from being able to pay
unexpected bills and fund your own retirement, gives you the confidence and
strength to go through everyday life. By saving money and increasing your
income, you can move towards banking your first $100,000. Once you do that, the
way to the next $100,000 becomes easier. Follow these steps below to save your
first $100,000.
The Right Mindset: Saving your first $100,000 is a
goal that is neither short-term nor easy. To get there you need to start
training your mind. You need to understand how to achieve this goal and plan
accordingly. If you are the kind of person who rarely takes note of your expenses
or budgets, now would be the time to start. All actions need to be oriented
towards achieving the goal of saving. Little things can add up. Reducing that
daily Starbucks habit or taking public transportation to work instead of
driving a few days a week can help. If you understand that these are minor
sacrifices for a little less financial uncertainty, the going will be smoother.
Create Short-Term Saving Goals: It’s all very well to imagine yourself in a country home
post-retirement, but that distant vision may not get you going today. To really
stay motivated, break your long-term saving goals into short-term goals. They
can be weekly goals. For example, a man who ran a dry-cleaning service decided
he would take some small change everyday and put it into his daughter’s college
fund, starting from when she was five years old and continuing until she
reached 18. Setting aside a little change didn’t hinder his business or
day-to-day life, but it did mean that he had a tidy sum saved by the time his daughter
was ready to go to college.
Certificates of deposits: Starting the process early and saving small amounts
steadily helps you know you have made progress covering the distance of a long
journey. You can have daily saving goals too. This will help keep you fired up
for the longer-term goals. Savings accounts, certificates of deposits, money
market deposit accounts and government bonds are good short-term money-saving
instruments. A savings account is particularly useful as an emergency fund
keeper.
Save on Taxes:
If you are employed and your employer is eligible, go for a 401(k) tax-deferred
savings plan. The amount you contribute to the plan and the earnings on it are
tax-free, until you pull the money out for retirement. The percentage you
contribute also reduces your taxable income by the same percentage. Some
companies will even offer a matching amount, based on how much you set aside
each paycheck. Early on in your career, you can invest in stocks more
aggressively. If your employer does not offer a 401(k) plan, then consider
opening an individual retirement account (IRA). Earnings in an IRA account are
also tax-deferred. To enroll in either, all you have to do is fill out a simple
form and contribute. This is a structured way to save, where the interest is compounded,
with tax savings to boot.
Reduce Your Interest Burden: We want it all. We want the home, car, home theater
system or the double door fridge. With a few easy key strokes online, we can
have it. But it turns out that instant gratification has a hefty price that can
take years to repay and even years off your life. Prioritizing debt and
reducing it is the first critical step to saving. Take a look at all of your
loans and see how long it will take you to whittle them down. If you do have
savings or fixed deposits, you can liquidate some to reduce your debt burden.
If you get a bonus or a dividend, think of prepaying a part of your mortgage to
reduce your interest burden.
Interest-free loans: In the case of credit card debt, talk to your credit card
company and negotiate for a lower rate if possible. Companies will sometimes
offer to take on other credit card company loans at a lower interest in their
pursuit of new customers. If you need to take out a loan, make sure you look
around carefully and choose to borrow money with the lowest interest rates.
You’d be surprised by how many people don’t do that. Ask friends and family who
might be willing to extend interest-free loans for shorter periods.
Take advantage of employee benefits: Look at how your employer can be your partner in your
savings goal. Many employers contribute an equal amount to 401(k) plans.
Contribute aggressively. Avail any other benefits your employer may provide,
like special discounts at stores, coupons or health plans. If your employer
provides assistance for skill upgrading or ‘back to school’ programs, take
advantage of the opportunity.
Generating additional income: Generating revenue is the other tactic that will help you
reach a $100,000 goal faster. Do you sew, do some other craft or teach? These
are some hobbies that can help rake in some extra money. You could tutor
children for a few hours a week or sell your crafts at the weekend market. You
could spend some time investing in stocks or do some freelance projects. Don’t
let any of your skills or talents go to waste. They will help you earn some
more money and keep you more fulfilled.
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