Every responsible adult would agree that savings are essential at any age, but most middle to lower-income earners have little to no savings by the time they reach forty. If you put it off or life had you living paycheck to paycheck and staring forty in the face, it’s not too late to start saving. Below are some tips to help you save money for retirement, emergencies, and other life goals.
When people hear the word savings, they generally think of taking a set percentage of their paycheck and putting it directly into a savings account. While this is a good idea in the respect that you are working to save money, bank savings accounts are not the way to save towards big goals.
Savings accounts are often low interest and are closer to putting your savings under your mattress or in the cookie jar. Instead, consult a professional financial planner and find ways to invest money to gain you more interest and grow your money more quickly. These investments could be through mutual funds, investment savings plans, investing in stocks, or buying properties or items that appreciate over the length of ownership. The essential thing to remember about investments is that you should research options and understand the risks and rewards.
Multiple Streams of Income
Besides investments that increase your existing income, another way to save towards your goal of three times your annual income by age forty is through additional income streams. In today’s world, the side hustle is typical as people make ends meet or work towards savings or other life goals financially. These side hustles could include driving for Uber or Lyft, or Postmates, etc. Like investments, additional streams of income should be well researched. Some options require little of your time and virtually no interference with your main job paying the bills.
Retirement Savings Plans
Many companies offer a retirement savings plan. This savings plan is a fund that the employee will contribute to from each paycheck. In most cases, the companies that provide retirement savings plans will also have offers to match a certain percentage of what the employee is investing in. While retirement savings plans are a great way to save money that has you seldom missing the money put into them, there are also some drawbacks to this type of savings. There are often penalties on early withdrawals of the money. Even because most of these savings plans are not taxed at the time of savings, you will owe a tax percentage on the savings when you withdraw the funds. Many retirement savings plans are also attached to mutual funds to increase them and are vulnerable to market fluctuations. When the economy is in a downturn or recession at retirement or the time of withdrawal, your money will not hold as much value.
Though leaving your thirties behind and facing the fabulous forties seems daunting, when it comes to savings, it’s easier than you think. Investments, multiple streams of income, and retirement savings plans are three reliable ways to save money for emergencies, big purchase items, and retirement. Most people decide that if they didn’t start saving earlier, they are too late to start in their 40’s, which is not factual. Any age can start saving if they have not and decide to put some money aside. Be prepared to be more aggressive to save what you need for the things important to you, but if you follow these ideas, you will be saving in your forties in no time.