First, we encourage you to deposit or credit at least 20% of every paycheck into your savings account and 3% into your retirement, IRA, or 401k account.
People across the globe find it extremely difficult to manage their finances and money-related matters. Not everyone is privileged enough to spend their lives without worrying about financial stress and traumas. According to a study, 78% of people worldwide live on a monthly paycheck-to-checkup basis. It indicates that people must limit spending and save more to survive hard times. However, people’s spending patterns have changed significantly over the past decade for numerous reasons. The top reasons include increased exposure and the impact of social media on our lives.
Getting the Financial Equation Right
No matter how much one may argue, managing finances financial equation certainly does not favor most American households. They have been fighting against all the odds to collect their monthly paychecks but haven’t succeeded in coming up with a clear-cut strategy or game plan to ensure ideal management and budgeting of every paycheck. There are many reasons why most Americans have been stuck miserably in severe financial crises and debts.
Here is the situation: once you get paid, your paycheck must go to several places simultaneously. Certain unavoidable expenses like rent, groceries, debt repayment, and utility bills need to be paid. They eat up a significant chunk of your every paycheck. The remaining, perhaps, goes into buying non-essentials. This paycheck schedule continues to go on and on, restricting you from saving money for hard times, especially your life in retirement.
Setting the Right Priorities
Undoubtedly, saving a portion of money from your every paycheck is no easy feat. When you have so many financial situations and concerns to address, saving money for meeting financial emergencies seems nearly impossible. So, you need to set priorities, make realistic judgments, and devise sound game plans to save money in your working years, or you may, unfortunately, find yourself in some miserable old predicament once you retire from the office. Saving money may be hard for individuals or families, but it’s not impossible. There are ways in which it can be done.
Budgeting and Planning – Done Right
You may be good at your job and earn money in various ways and means, but that doesn’t mean you have expertise in handling and managing your finances well. It is ideal to acquire a financial planner’s services for financial help in budgeting, retirement plans, debts, savings, and investment options. They will have next-level knowledge, skills, expertise, and experience handling technical financial matters. They may also help or guide you in what to do with your every paycheck and how much you should contribute to your retirement savings account.
The First Things You Should Do With Every Paycheck
Contribute To Your 401k
If you expect a dreamy retirement one day, you must contribute to your 401k, IRA, or both. According to financial experts, those contributing to their retirement accounts in their 30s have a more secure and stable future since they can worry less about financial fears or distress. No matter how hard you find saving money every month, it would be best to contribute to your 401k or IRA account regularly.
It doesn’t matter whether your employers offer you a retirement plan. If they don’t, you can set up your retirement account and start contributing to it because it will be yours forever. To accumulate wealth for your post-retirement life, you should create your retirement account as early as your 20s. Contributing a tiny portion of your every paycheck, like 3% of your income, doesn’t seem to be a burden on your shoulders at such a young age. If others can do it, you can too! It is far better to hire professional financial planners instead of managing money-related things yourself because they have expertise in dealing with such long-term retirement plans.
Credit Money to Your Savings Account
According to a study, a person must have an equivalent of 9 paychecks saved to cope with financial emergencies successfully. Financial pressures lead to a great deal of stress and emotional and mental trauma, especially for those who lose their jobs, address financial or medical emergencies, and mismanage their debt repayment schedules. Regardless of the causes, the repercussions are often too huge to handle alone.
Experts recommend saving for rainy days because financial problems and dilemmas are not announced. Per the 50/30/20 rule, you must save 20% of your income from every paycheck and credit the proportional amount into your savings account. They also offer interest-growing potential, accumulating to become a hefty amount when you near retirement.
Closing Thoughts
Saving money for hard times is no joke, especially in today’s era. Cutting back on your money on almost every paycheck requires motivation and loads of temperament and spirit. Hiring professional financial planners to manage retirement and saving plans is better as they have deep-rooted knowledge, skills, expertise, and experience in handling and managing technical money-related tasks.
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