What does financial freedom look like to you? It could look like a sprawling mansion on a rolling hill. It could look like a multiple-car garage or dozens of passport stamps. Maybe it looks like passive income or dividends to live off when you retire. Whether material luxury or monetary fluidity comes to mind, one crucial component when attaining either is saving.
According to a chart by GOBankingRates.com, 49% of Americans either have no savings account or $0 in their savings account, and only 19% have $5,000 or more. Last year, USA Today reported that Millennials will need 1.8 million dollars to retire comfortably at age 65. This number, adjusted for inflation looks more like $530,000 for 80s babies and just under $400,000 for young Millennials. Many of us spend life trying to fill this gap. For today’s #50forMe Challenge, we’re noting some ways to save and get on track for financial freedom.
This is an easy way to save on a monthly basis. First, we calculate how much we spend in a week on miscellaneous expenses—think dining (other than groceries), hobby charges for activities like video games, yoga, etc.; shopping and more. We can either jot down a quick list or, for the most accurate figure, track our expenses for a week. Then for one week per month, we hold on extra spending. For example, say we spend $15 per day on lunch and go out twice a week at $50 a pop. That’s $175 of non-essential expenditures that could be saved with a one-week spending freeze. Over a year, this is $2100, all from just packing lunch and staying in one week per month. If a freeze seems like a stretch, try spend-free days and see if there’s a noticeable difference at month’s end.
Lump Sum Saving
This is a simple as paying expenses, then placing the leftover amount into savings. This way, even if 50% of our income goes to rent or mortgage, and another 30% goes to all other expenses—transportation, food, childcare, loan repayment, insurance, etc.—up to 20% can be saved. With a $40,000 annual salary, $8,000 or more can be saved in a year.
The dream is to see savings multiply, and investment makes this possible. A couple tried-and-true investments are rental properties and IRAs. Anyone can get into real estate, however one note to take seriously is that at least $40k—ideally $50k+—of liquid cash or capital is needed to set the proper foundation for real estate ventures like rental properties. The return on investment for these, however, can certainly offset the initial costs and risks, sometimes in 6 months or less. The beauty of IRAs is that they can be drawn from our paychecks; no start-up fees, no risk, but delayed reward. Either of these investment opportunities and many others can leverage our bacon exponentially.
What savings strategies work best for you? Let us know in the comments below.