If you want to build wealth and not debt, then you need to become an American Saver. I wish someone had shown me how to build wealth when I was younger.
Suzanne Badenhop, Extension Professor and Specialist for Management and Equipment, recommends saving $2,000 a year from age 20 through 29. You would have to save $166 per month. If you even the amount to $40 per week (4.3 weeks per month) then the amount saved becomes $8 per day for a five-day workweek or a little less than $5.75 per seven-day week. It comes down to about 72 cents for every hour of an eight-hour workday. When you look at this amount, then it looks manageable even at a young age. Even if nothing else is added to that sum of money after age 29, the individual will be a millionaire by age 65. The most important thing is to start with a reasonable goal, be consistent and start early.
The following strategies are easy ways to save and build wealth.
1. Pay off high-cost debt. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. Many people don't think about the long-term cost of buying on credit. They only look at the monthly payment. Check the interest rate on all your credit cards. If you have had some department store cards for a long time, then your interest rate may have remained high. The amount you pay in interest goes up considerably as the length of payment increases.
2. Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once these families have made their last mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed on in emergencies or converted into cash through the sale of the home. Other possibilities exist for using your home as a source of income while also donating the property to a charitable organization.
3. Participate in a work related retirement program. Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401(k) for corporations or 403(b) for non-profit organizations. Many employers match or even exceed an employee's contributions to these plans. The investment yield when a match is involved is at least 100% on the initial investment. Saving should begin early and be consistent.
4. Save monthly through an automatic transfer from checking to savings. You may also want to consider automatically transferring money to a growth investment such as a mutual fund once you have established an emergency fund. America Saves is sponsored by the Cooperative Extension Service nationwide. The program is also supported by grants from national and local foundations, and money from the non-profit Consumer Federation of America.
It does not cost anything to participate. Your only obligation is to develop a specific savings goal, choose a savings or investment plan, make a deposit in the account or plan each month (or make a debt payment) and let the plan know that you are working toward your savings goal.
Benefits of the plan include the American Saver newsletter, which will be mailed or e-mailed to you four times a year, a fact sheet on different types of savings accounts, and free advice from a certified financial planner. America Saves is a great way for an individual or family to begin saving when they have never saved before. Long term investment and retirement planning involves additional steps.
You can become an American Saver by completing a form at the G.C. Extension Service or you can request information from America Saves, P.O. Box 12099, Washington, D.C. 20005-0999. You may also enroll online at www.AmericaSaves.org.
Post a Comment
