4 tips to maximize on your savings
The whole point of us spending the entirety of our younger years working and earning moneyis so that we can save enough for our later years when we will not have as much energy to work. This is why this period is referred to as retirement.
It is especially important to have better control of our finance when young because as we grow older, the levels of financial insecurity increase. This basically means that we will not have the same opportunities to make money as we have today.
Here are 4 tips to help you maximize on your savings especially during your younger years.
Tip 1: Set aside money for emergencies
Most people confuse emergency money with savings. In many situations, you have had to tap into your savings when faced with a family emergency that required a large amount of money. More often than not, once you have used up this money, you are never able to replace it thereby depleting your savings accounts. It is therefore important to plan your finances in a way that you set aside money to finance emergencies without having to tap into your savings money.
Tip 2: Maximize on your 401(k) contribution
If you are lucky to work in a company where your employer offers a matching 401(k) program, you had better go for the maximum amount allowed. This is an investment with one of the best returns because you get to almost double your money instantly. In the event your company does not offer a 401(k), then look for an alternative savings plan which allows your savings to grow on a compounded interest basis.
Tip 3: Plan for large expenses in advance
You must make it a habit to plan for your large expenses way in advance. For instance, if you intend to spend on a house, a car or college tuition, this is an expense you should plan for at least 12 to 18 months in advance. You should also ensure that this is not money that will be spent from your savings or emergency allocation.
Tip 4: Ensure to fund a ROTH IRA
ROTH IRA is basically an individual retirement account which allows you to make contributions after tax. This basically means that you can access your money at any time without incurring a penalty. When you are at the retirement age of 60 years, all your withdrawals will be tax exempt. However, it is important to do sufficient homework with regards to this option because there are a number of requirements such as income eligibility limits which have to be adhered to.
All in all, the earlier you start taking advantage of these savings options the more the returns will be, and the happier your retirement will be.