It is estimated that 78% of Americans live paycheck to paycheck, up from 75% last year. Living paycheck to paycheck can leave you financially devastated if faced with even the smallest unplanned financial emergency, not to mention the stress of worrying about one. The biggest obstacle to combat the paycheck to paycheck trap is telling ourselves we can’t afford to save. When we send our brain a message, we seem to listen. It's no wonder then, when we tell ourselves we can’t afford to save, we don't. So how do we turn the cycle around and begin saving?
1. Set Money Aside Each Month. The biggest way to stop living from paycheck to paycheck is to have money in the bank. While it sounds ridiculously obvious, the truth is you need to change the rules. Rule #1 is to stop telling yourself you can’t save and then download STASH on your IOS or Android phone. STASH is probably the most effortless way to save extra money. You decide the amount you want to save each week and it goes into an account that you are most likely going to forget about until the reminder pops up on your phone that you’ve saved some money. Afraid to commit? You can try it out for as little as the price of that latte you just ordered. You can stop anytime and should you need to move money back for that unplanned emergency, it's simply a swipe on your phone. STASH will charge $1.00 per month for balances under $5,000 but it's a small price to pay if your not disciplined to save anywhere else.
2. Sign up for a Wells Fargo Everyday Checking Account with an attached savings,
(free if you use your debit card 10 times a month) Every time you swipe, and extra dollar is deposited into a savings account. If you spend $2.00 at Starbucks, $3.00 will come out of checking with the extra dollar going to savings. I was able to save several hundred dollars each month just from my regular purchases.
Be disciplined each month to then move that money to another outside account such as STASH or open another long term investment account (or check with me) and watch your money grow.
3. Invest your change digitally with ACORNS, another Iphone app that rounds up each purchase you make with linked debit and credit cards and puts the money into a savings account. Once the money builds up you can choose to invest the money or check with me and I can help you put it somewhere to maximize your return.
4. Still not using your 401-k plan at work? Then you are definitely leaving dollars on the table. For each deposit you make, no matter how small, Uncle Sam is going to contribute to your savings by reducing your tax liability with your pre-tax deposit. For instance, if you save $50.00 per month and your are in the 28 % tax bracket your true cost of saving is approximately $36.00. Additionally, many employers have a built in match plan. As with most automatic savings programs, once it starts coming out of your paycheck you don't see it, feel it or miss it but you’ll love watching your savings grow! Another benefit of the 401- k? Many plans have loan provisions that will allow you to “borrow “ your own money at a very small rate of interest.
Stop telling yourself you can’t afford to save, you can’t afford not to!
Lori Brand is Managing Director of SafeChoice Financial Group and a co-founder of Connect the Dots 4 Women, an organization whose mission is to connect, inform and educate women in business in areas such as work, money, well-being and lifestyle.