3 Steps to Help You Save More So You Can Invest

One of the major stumbling blocks for investors is having enough cash to put into an investment plan in the first place.

It takes money to make money, after all. And if you spend every dime you earn you can’t get started making money through investing at all.

So how can you get some money set aside to invest? By following these three simple steps.

First, make a budget. It doesn’t have to be complex or driven by software. Just look back over your bank account and credit card statements and write down what you spend week to week.

Chances are, you’ll find that you spend more on certain things than you realize. It might be takeout food or getting your nails down weekly. Or maybe online impulse shopping.

The money is going somewhere besides food, rent and transportation. Find out where.

Second, come up with an amount of cash each month you can manage to save, based on your budget. It might not be a lot at first. If it’s $50, it’s $50.

Try over time to move that number up, but never move it down. You have to come up with a level of disposable cash that you are actually disposing of and stop throwing it away each month.

Finally, once you know the number, try to automate your savings. This might be an automatic withdrawal from your check on payday to your savings account.

If you have a 401(k) at work, go ahead and make a fixed contribution. You might find that the tax savings will offset your contribution goal, allowing you to up it a little right away.

If you get a company match, that’s even more toward the bottom line.

Emergency cash

Note, however, that it won’t help to save $50 a month into a 401(k) but have absolutely nothing in the bank for emergencies.

Thankfully, you don’t need to set aside that much. A couple of economists figured that having about $2,400 in the bank will cover most people’s unexpected costs.

If you want to set aside more, great. But try to get to that low figure quickly and then take your next steps toward automation.

Chances are you will get raises along the way at your job. Make a deal with your future self to set aside the lion’s share of those increases.

If you get a monthly increase of $300, increase your 401(k) contribution by $200 and let the other $100 flow into your spending money. Over time, that steady growth of your contribution rate can greatly enhance your retirement plan balance.

Don’t give up on investing or put it off. Time is one of the most powerful ways to build a strong retirement balance. The sooner you save, the more you’ll have in the long run.

MarketRiders, Inc. is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.