Successful saving and investing takes time and persistence. To have the money in your budget each month for savings and investment goals takes an ongoing financial commitment.
If you’re learning how to make that financial commitment stick, consider these five habits of successful savers and investors.
1. They Set Aside Today’s Money for Future Goals
Successful savers and investors think ahead. They don’t just live for today and let tomorrow sort itself out. They put financial capital toward savings and investing goals that are important to them — retirement, paying for a child’s education, etc.
2. They Stick to Their Goals
A key to successful saving and investing is consistency. They stick to their savings and investing goals month after month and year after year. Savings is a given in their monthly budget and they know it is an essential part of meeting future financial goals.
3. They Plan for Emergencies
Successful savers and investors know that financial emergencies happen. And they have money set aside for these occasions.
Three to six months’ worth of living expenses is a good savings goal for an emergency fund.
But even having a couple thousand dollars tucked away in a savings account can make a big difference to staying on track with finances when a large financial expense comes your way.
4. They Pay Themselves First
Successful savers and investors put their savings goals first. Before anything else, money from their paychecks gets put aside for saving and investing – 10% is a good starting point.
Depending on their income and other financial commitments, some savers and investors are able to dedicate 25% of their income and even more to saving and investing.
So get in the habit of saving first. Whenever that money from a paycheck hits your checking account, move a chunk to savings and stick with this pattern month after month. Consider saving before the money hits your checking account by joining an employer’s 401(k) plan and having pre-tax money set aside for retirement. Opening an individual retirement account is another good saving and investing option.
5. They Live Below Their Means
Successful savers and investors live below their means. If they spent every penny that they earned, they wouldn’t have the money to set aside for future goals.
To be a successful saver, you must spend less than you earn on a consistent basis.
If on the other hand, you are spending beyond your earning capacity and monthly income, you will accumulate debt, making it more difficult for you to save. You also risk damaging your credit if you overextend yourself on debt and fall behind on your payments. You can see how your debts are affecting your credit by getting your free credit report summary on Credit.com.
When you borrow, you must pay back all that you borrowed and all the accumulated interest and finance charges owed to lenders.
Borrow too much and the money that could be put aside for savings and future goals gets paid to lenders instead. To see just how much the money you are borrowing is costing you, use this lifetime cost of debt calculator.