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You have probably heard it a thousand times before, but saving your money is extremely important. Having a savings protects you and your family in the case of an emergency, allows you afford big ticket items, gives you the freedom to purchase items, etc. While most people realize that having a savings is important, the hard part is actually saving, here are some tips.
It’s actually very easy to save a small portion of your earnings each paycheck if you just follow a few simple guidelines. They include:
Enroll in Your Company’s 401K Plan
Another great way to maximize your savings is to invest your savings each month in a company sponsored 401K plan. Most medium to large company’s offer their employees a 401K plan in which you can set aside an amount of income to invest in either stocks, bonds, money markets, etc.
One of the great advantages of saving money in a 401K is that the tax is deferred when the money is removed- usually at the time of retirement. This means that you can invest income that hasn’t been taxed yet by the government- giving most individuals 30% or more savings power.
Save Money with an IRA
An IRA stands for Individual Retirement Account. It is similar to a 401K in which an individual or couple can save money in a tax deferred account where it can grow until removed- usually at the time of retirement. If your company doesn’t offer a 401K plan or if you are self employed, an IRA is the perfect way to maximize your savings. Opening an IRA is extremely easy and most neighborhood savings banks offer them.
Direct Deposit Yours Savings into a Special Account
Many people are paid now via direct deposit, meaning that they no longer have to wait on line at their bank to cash a check and deposit the money into an account. Their company instead digitally deposits their income directly into a savings or checking account of their choosing. What some savvy savers are now doing is asking their employers to also direct deposit a small percentage of their income into a second account- one set up primarily for savings. For instance, you can easily save 5% of your income each pay period by having it separately deposited into a special savings account. Since the money is automatically deposited into the account without any intervention- it is out of sight and out of mind- making it very easy to save money over the long term.
Maximize Your Savings