Ready? Here it is….
Your goal for 2010 is to save more than you did in 2009.
There are two parts to your goal. First, you need to increase the percentage of income you save. Second, you need to save a greater dollar amount then you did this year. For example, if you saved $1,000 in 2009, you need to save any amount greater than $1,000 in 2010.
The Habit of Saving
The common benchmark is to save 10% of your income. For someone who has never ingrained the habit of saving, it’s not very easy to go from saving 0% to 10% in a day.
The best approach is to start small and incrementally build you way up. If you didn’t save a dime last year, make it your goal to save 2% of your income. If you saved 10% of your income last year, your goal should be to save 12% in 2010.
Where to Save
The first place to save will always be in tax-advantaged accounts. You can even start today by simply logging into your 401K plan’s website and changing your contribution percentage.
If for whatever reason that doesn’t apply to you, look into contributing more to your IRA or a college savings fund if you have children.
If those options are not available, it’s as simple as putting money into a savings account once a month.
Down the Road
As for 2011, you should set the same goal – to save more than you did in 2010. Each year incrementally increase your savings ratio.
Saving just 10% of your income will never get you to financial independence before your 65. Even then, you will have to be on a tight budget for the remainder of your life.
If you want to really build wealth, you’re going to have to increase your savings ratio. It’s best and easiest to do this gradually.
Each year, it was always in the back of my mind to give to charities who I thought were doing important work. Unfortunately, what normally happened was at the end of the year, I would remember to make my donation, but not have the money to do so.
Therefore, three years ago, I decided at the beginning of the year to set aside $1 a day. Guess what happened? At the end of the year I had $365 in a checking account, which I donated. No Bill Gates, but I was still proud of myself.
The next year, I committed to saving $2 a day. I paid myself first every month and by the end of the year I had accumulated $730. This year I increased it to $3. Next year, I plan to increase my charitable giving to $4 a day. .
All I had to do was start the habit. I haven’t even noticed the money missing from my savings account.
You can accomplish your goals for 2010 today. Start with just $1 or 1% of your income. Saving is like any other habit. Once you done it over and over again, it becomes effortless.
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