n my book, Effort-Less Wealth – Smart Money Habits At Every Stage of Your Life, I share 22 Smart Money Strategies that I discovered from my Rich Habits Study.
According to various studies, the first crop of Millennials who have entered the workforce, are ahead of the curve when it comes to savings and spending than that of their parents.
A 2014 Transamerica study found that 70 percent of Millennials in the work force were already saving for retirement, either through employer-sponsored plans, such as 401(k)s, or similar plans and they also found that these Millennials began saving at the unprecedented age of 22.
According to the Financial Trade-Offs study, commissioned by Ameriprise Financial, Millennials are significantly more likely than both Boomers and Gen Xers to be consciously cutting back on discretionary expenses.
This is good news and a good trend if it continues. To ensure that it does continue, I’d like to share just one powerful smart money habit from my upcoming book, Effort-Less Wealth:
Savings-Bucket System
It’s much easier to save, if you define exactly what it is you’re saving money for. During your life, you will go through various stages and each stage will place different financial demands on you.
#1 Define Your Life Event Savings Buckets:
- Engagement Ring Bucket
- Wedding Bucket
- Honeymoon Bucket
- Home Down Payment Bucket
- Birth of a Child Bucket
- Vacations Bucket
- Holiday Spending Bucket
- Child College Education Bucket
- Retirement Bucket
- Rainy Day Bucket – Job loss, emergency home repairs, medical expenses, etc.
#2 Establishing Savings Goals For Each Bucket
Examples:
- Engagement Ring Bucket – 15% of net pay for one year.
- Wedding Bucket – 20% of joint net pay for 18 months.
- Honeymoon Bucket – 5% of joint net pay for 10 months.
- Home Down Payment – 15% of joint net pay for three years.
#3 Automate Your Savings Goals
This is where the rubber meets the road – implementation. Direct a fixed percentage of your net pay into each bucket via automatic withdrawal from your net pay check or from your main checking account. If you do it through your net pay check, you will need to instruct your payroll company how much of your paycheck goes into your specified buckets. The payroll company will then automatically send each specific amount directly into the savings account you earmark for each particular bucket.
Saving money is a process. If you don’t have a process, it will be difficult to save for the various stages of your life.
When you develop Smart Money Habits, like the Savings-Bucket System, you feel like you are in control of your financial life. It’s empowering.
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Tom Corley is an accountant, financial planner, public speaker, and author of the books “Effort-Less Wealth: Smart Money Habits At Every Stage of Your Life” and “RichKids: How to Raise Our Children to Be Happy and Successful in Life“. Corley’s work has appeared on CNN, USA Today, The Huffington Post, SUCCESS Magazine, and many other media outlets and podcasts in the U.S. and 27 other countries. Tom is a frequent contributor to Business Insider and CNBC.
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