Category: Saving money

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Four Steps on How to Save 10000 in a Year Quickly

How to Save $10,000 in a Year

Many people work hard and earn a good income but feel like it’s a struggle to save money. They don’t have the expertise to develop a financial plan to offer them security and progress towards crucial financial goals. They think asset management is only for people with seven figures between their saving accounts and their investment accounts.

Not setting a savings goal makes the future look bleak. Nobody wants to lose sleep over unexpected bills. Without a savings goal, you may not be able to map out the steps to establish an emergency fund or save money for a down payment or plan for a comfortable retirement.

On the positive side, almost everybody can develop a plan to find a way to divert extra money to fund their savings account. We realize that many folks need guidance and support to get started. Don’t wait to contact Korving & Company, LLC in Suffolk, Virginia. Our experienced team will work to understand your unique situation and then tailor solutions to make life-changing improvements to your personal finances.

Can You Save Money, Even $10,000 a Year?

GoBankingRates reported an average personal savings rate of over 32 percent during the pandemic. Since then, decreased government handouts, rising costs, and the ability to travel or access entertainment have made saving more challenging. Still, the pandemic’s disruption benefited some people. It allowed them to see that changes in their lifestyle and perspective could help them change their financial lives.

Everyone can save money. You need to develop a plan and attitude towards saving. Your own personal savings goals may vary. Depending on income and financial goals, you may decide you can only save $5,000 a year. Some of you can save $20,000 or more every year.

How Do You Save $10K a Year?

To meet your personal savings challenge, you need to gain control of your spending. You can do it by following straightforward steps. You should set goals, understand your spending habits, and reduce unnecessary expenses.

Set a Savings Goal and Make it Personal

You’re most likely to succeed if you set goals. Go ahead and aim high by setting ambitious goals. That way, even if you are slightly off target, you may still be higher than if you aimed directly for your target.

You should start with personal goals that you find meaningful. For instance, consider the feeling of security of knowing that you have a checking account with a balance large enough to pay a dentist or auto shop. Imagine the feeling of financial freedom that you will enjoy after you successfully saved for retirement.

Can you save $10K a year? That figure does not look as intimidating if you think of it as setting aside about $200 a week. US News says that’s less than the average weekly grocery bill for a family of four. 

Many people find this goal achievable through budgeting and reducing waste, such as too much dining out and trips to the coffee shop. Still, if $200 a week sounds like too much, consider starting somewhere – even if you can only save $100 a week, you’ll have $5,200 in a year.

Figuring out your own savings goal shouldn’t take complex math. It will, however, take an earnest commitment. You may need to set a tentative plan and adjust it as you learn more about your spending habits or your income increases.

Tackle Your Monthly Budget

You might first divide your finances into income, saving, and spending. Most people know how much they earn and save but struggle to understand their spending. You must understand and control your spending budget to hold onto any amount of money.

Automate Your Budgeting to Save Money and Time

Lucky for you, technology can help automate your budgeting process. The right tools can even make it fun, like a game. According to CNBC, apps like Mint make budgeting easy and efficient.

The app connects to various accounts to track savings, spending, and income. It can also send payment alerts. Best of all, Mint offers many helpful, free features. You can try it out for free to decide if the premium version provides value. 

Budget Below Your Means

Do you want to increase the balance in your savings accounts and investment accounts? The simple answer is that you will need to spend less than you earn. The budget process should uncover wasteful spending. Some examples include:

  • Cancel unused subscriptions: Perhaps you rarely use some streaming apps or a gym membership. Why pay for them? Consider canceling cable TV in favor of a few streaming services and an old-fashioned antenna.
  • Explore cheaper alternatives: Maybe it’s time to shop around for better deals on car insurance, phone service, and utilities. Look for credit card providers with no-interest promos on balance transfers. Then transfer the balance, enforce a credit card spending freeze, and use savings to pay off debt before the promo rate ends.
  • Enjoy an affordable lifestyle: Some families save hundreds each month by hosting potlucks or game and movie nights instead of paying more for outside entertainment and dining out. Invite friends along on a picnic for birthdays instead of going to a four-star restaurant.  Learn to make your own coffee drinks instead of spending several dollars or more for what is really a 5-cent pick-me-up in a five-dollar cup at the coffee shop.
  • Develop affordable shopping habits: Most retail stores work hard to entice shoppers to buy more than they planned. Sticking to a shopping list based on meal planning and other needs can help. Shopping with lists can reduce the number of trips to the store and curb impulse purchases. For many, it can help improve health by cutting junk food purchases.

Consider a New Job or Side Hustle

Some people break down their income and monthly expenses and still struggle. They don’t have enough to set aside extra cash for savings. They must earn more money to improve their bank account balance.

Government websites report increases in personal income this year, but personal spending also increased. Have you talked with your current employer about the potential for a raise?  If so, and they’ve told you no or dragged their feet, you might have a chance to give yourself a raise by switching employers.

If you like your employer or co-workers and don’t want to rock the boat, consider side hustles. The amount of money you can make in a few hours in the evening or on weekends may surprise you. The best gig will depend upon your talents and preferences.

For instance, can you offer to mow your neighbor’s lawn, run errands, or paint a room? Could you find extra things around the house to sell? Would you be interested in driving for one of the ride-sharing services or meal delivery services? If you have a particular expertise, you can set your own hours to answer questions and help people with services like JustAnswer. Topics range from cars and electronics to legal and wellness.

Divert Extra Income Into Savings

How do you typically use gifts, tax refunds, or other unexpected windfalls? Instead of considering such things as excuses to spend more, you can view them as an excellent chance to catch up on savings.

For instance, if you need to divert savings to pay for an unexpected car repair one month early in the year, you could use your tax refund to make up the difference a few months later.

Why Should You Prioritize Creating a Budget?

Don’t think of a budget as something extremely rigid that will keep you from freely living your life. Understanding your spending will not imprison or restrict you. In fact, it’s just the opposite. Over time as you grow comfortable in your budget and are consistently saving, you’ll see that budgeting is an essential tool assisting your financial journey. Properly creating a budget involves gathering the information you need to gain control over your finances and determining how much you should save versus spend.

Your budget will serve these four primary purposes in helping improve your personal finances:

  • Planning: You can use information you already have and information that you will gather to help plan around your saving and spending habits.
  • Organizing: Your budget will help you keep your spending and saving categorized to determine exactly how you spend money. This will help you identify and face your weak spots. You will see how well you meet short- and long-term savings goals and help you adjust and pivot along the way to keep sloppy habits from becoming problems. 
  • Tracking: You won’t find yourself wondering where all your money went each pay period. Instead, you’ll know precisely how you allocated funds.
  • Improving: Most of all, knowing where you stand today will help you improve your finances next month, next year, and decades in the future.

Which Strategies Help You Stick to Your Budget?

You should give yourself credit for choosing to improve your finances. Most of us have vowed to make changes that we didn’t keep very long. As we know from failed new year’s resolutions, lifestyle changes require developing new behaviors and turning them into habits. Once you resolve to start saving more money, how can you stick to your plan so that you become successful at it?

The American Psychological Association says that people should make lasting changes by thinking of them as a gradual evolution more than a resolution. For you, this could mean changing habits gradually, measuring progress, and getting support when needed.

These practical suggestions can help you stay on track and even get back on track after a misstep.

Check Expenses Each Week

Many weight-loss programs have participants weigh themselves each week. This timing avoids frustration because of daily fluctuations. At the same time, it has people track their progress often enough to ensure they are still staying on track.

In some ways, you can compare improving your financial situation to improving your health. If you set aside a few minutes each week to track expenses, you can see how well you’ve stuck to your budget.

Challenge Yourself: Find New Ways to Save Money

For many, frugality becomes a fun and challenging part of their lifestyle. These dedicated savers feel victorious each time they pay off a credit card balance, rack up coupon savings on their grocery store app, turn those grocery rewards points into dollars off at the pump, and watch their dividend and interest income build to their savings.

Even if you do not want to engage in a savings challenge daily, you can feel satisfied when you explore smarter ways to reduce living expenses. For instance:

  • You might consider covering windows with inexpensive insulating film to conserve energy and make your home more comfortable.
  • Capital One has an app and browser extension that automatically finds and applies coupon codes when shopping online.
  • Apps like ShopKick, Swagbucks, and Ibotta will let you earn rewards for activities or purchases you would make anyway. Swagbucks also offers printable coupons for local stores. 

How Much Money Do You Need to Save $10,000 a Year?

If you want to save $10K yearly, your determination might get you there. Ten thousand may sound like a substantial sum, but when you divide it by 12 months in a year, you come up with a monthly goal of $833.34.

That sum gets even easier to manage when you figure that saving about $208 a week will help you achieve your financial goals. Even better, that figure translates into about $30 a day.  How many days have you spent that much or more on a restaurant meal when you could have enjoyed a tasty dinner at home? Think of it as paying yourself first for an honest work day.

Also, keep in mind that saving money in high-yield savings accounts or investment accounts will help your money earn even more money over time.  If you save $10K annually, you’ll actually wind up with more than that at the end of the year if you use a high-yield savings account because of the interest that you’ll have earned during the year.

You will do even better if you maintain your progress over time.  Think of how much will add up in five years, ten years, or even thirty years if you continue saving all that time. 

You might enjoy using this savings goal calculator to determine how much you should save to meet various goals over time. For instance, you can use the calculator to see how much you need to save each month to save $50,000 for a real estate down payment in five years. 

How to Overcome Savings Challenges

Have you tried to set aside $10K a year and failed? If you manage to save anything, you should still consider your project a success and a learning experience.

Perhaps you set overly ambitious goals and should aim for a more modest one. For instance, you might have more money to invest after paying off student loans. You might also have more time to earn and save money after your child enters school. You can always revisit the amount you decide to save later if your expenses decrease or your income increases. Dave Ramsey has some helpful books on how to get out of debt ruts and start on the path to saving and financial freedom.

Determination to save will only take you so far. Even if you don’t have much extra time, you can still explore some other ways to earn more money.

Have You Explored Passive Income?

Committed savers love passive income. This income depends upon using your assets to earn income without additional contributions. After all, successful people value their time. You will enjoy much more freedom when your money works for you, too. 

Compound Interest and Dividends

Earnings on your savings offer you a form of passive income. When your bank account earns interest or stocks pay dividends, that counts as income. Remembering that you can put your money to work making more money should offer extra incentive to save as much as possible.

Even better, your earnings will compound. If you’ve saved $10,000 that earns five percent a year, by the second year, you’ll earn interest on $10,500. It’s like your own money is working to provide you with income and will even give itself raises.

Other Sources of Passive Income

At first, you won’t have much money saved, so your interest or dividend income won’t snowball rapidly. We know some of you may not have time to handle more work hours to earn extra income you can put towards your goals. 

To hasten your progress towards financial freedom, you can consider other sources of passive income. You may have other assets to employ if you lack time and money. For example:

  • Rent out unused space: Did you know that services like Neighbor.com help you rent out spare storage or parking space? Even an area as small as an empty closet or corner of the garage could earn money, which may provide extra motivation to find unused items to sell on eBay.
  • Place ads on your car: Your real journeys on the road can help you along your financial journeys. Companies like Wrapify pay drivers to place ads on their vehicles. Simply enroll, download the Wrapify app, and drive normally. The app tracks your routes, and advertisers will make offers you can accept or decline.
  • Rent rides and other household goods: Do you own a car that you don’t use daily? Do you have a bicycle you only use on the weekends? You can find crowd-sharing services that will let you rent out rides and other household goods.

Flexible Active Income Opportunities

As the name implies, earning active income takes some effort. At the same time, you will find that many active income opportunities don’t require as much time as getting a second job. You may easily balance these gigs with your current employment or family obligations.

Even better, you can choose these kinds of opportunities based on things you already enjoy:

  • Profit from your hobbies: Develop your skills, do what you love, and make extra money. Online sales marketplaces like Etsy and Getty Images let all sorts of artists and craftspeople profit from their work.
  • Share your knowledge and skills: Can you develop classes, write eBooks, or tutor? Look at Udemy, Amazon, and Skillshare for inspiration.
  • Drive or deliver: You might consider driving for a company like Uber or Lyft in your spare time. You can pick up passengers for rides or opt to deliver food.

A Purpose-Driven Savings Plan Ensures Success

Anybody who has ever lost sleep or felt distracted worrying about how to pay a cell phone bill or finding the funds to handle an urgent dental visit understands the importance of financial security for peace of mind.

Still, it will take some discipline to achieve your savings goals. If you need to give up some immediate pleasures to reach long-term goals, it helps to picture how much financial security can improve your life. For example:

  • Imagine the security of enjoying access to an adequate emergency fund, bank account, and investment account.
  • Consider the joy of being able to achieve long-term goals such as helping kids with college, buying a home, and spending your golden years with comfortable retirement savings.
  • Think about how good you’ll feel when your invested money begins earning its own money to provide a source of passive income.

Why Partner with a Financial Planner?

Committing to a financial plan for long-term wealth building and security makes sense. Still, you might not know the best places to put your money for optimal results. Also, you may not understand the big picture of how various alternatives and choices may impact taxes, your ability to plan for future uncertainties, and family members and loved ones.

Also, though you understand the importance of saving, you know setbacks and temptations will arise in the future that may tempt you to make snap decisions that could materially impact your overall financial picture and undo much of your hard work and savings. The American Psychological Association says that finding support offers one of the best ways to ensure long-term commitment to goals.

Qualified financial planners will take time to understand your goals. They can map out a plan that accounts for all variables. Perhaps best of all, your financial planner can provide long-term support to help navigate future changes and disruptions. Instead of trying to build wealth on your own, you will have a team in place.

Take the First Step to Financial Security Today

Lots of people say they will start saving next month or next year. Financially secure people may tell you the best time to start saving occurred five or ten years ago. However, if you aren’t already saving, the best time happens today! The sooner you commit to saving, the better off you’ll be in the long run.

Contact Korving & Company LLC in Suffolk, VA today to discuss your financial dreams and goals. By next year, you could already enjoy significant progress on your financial journey and peace of mind.

The Fate of Social Security for Younger Workers – And Three Things You Should Do Right Now

We constantly hear people wonder whether Social Security will still be there when they retire.  The question comes not just from people in their 20’s, but also from people in their 40’s and 50’s as they begin to think more about retirement.  It’s a fair question.

Some estimates show that the Social Security Trust Fund will run out of money by 2034.  Medicare is in even worse shape, projected to run out of money by 2029.  That’s not all that far down the road.

So how do we plan for this?

The reality is that Social Security and Medicare benefits have been paid out of the U.S. Treasury’s “general fund” for decades.  The taxes collected for Social Security and Medicare all go into the general fund.  The idea that there is a special, separate fund for those programs is accounting fiction.  What is true is that the taxes collected for Social Security and Medicare are less than the amount being paid out.

What this inevitably means is that at some point the government may be forced to choose between increasing taxes for Social Security and Medicaid, reducing or altering benefits payments, or going broke.

Another question is whether the benefits provided to retirees under these programs will cover the cost living.  Older people spend much more on medical expenses than the young, and medical costs are increasing much faster than the cost of living adjustments in Social Security payments.  If a larger percentage of a retiree’s income from Social Security is spent on medical expenses, they will obviously have to make cuts in other expenses – be they food, clothing, or shelter – negatively impacting the lifestyle they envisioned for retirement.

The wise response to these issues is to save as much of your own money for retirement as possible while you are working.  There is little you can do about Social Security or Medicare benefits – outside of voting or running for public office – but you are in control over the amount you save and how you invest those savings.

As we face an uncertain future, we advocate that you take these three steps:

  1. Increase your savings rate.
  2. Prepare a retirement plan.
  3. Invest your retirement assets wisely.

If you need help with these steps, give us a call.  It’s what we do.

Old Woman Exercising With Dumbbells

Three Ways to Stay Financially Healthy Well into Your 90s

According to government statistics, the average 65-year-old American is reasonably expected to live another 19 years.  However, that’s just an average.  The Social Security administration estimates that about 25% of those 65-year-olds will live past their 90th birthday.  We were reminded of these statistics when we recently received the unfortunate notice that a long-time client had passed away.  He and his wife were both in their 90s and living independently.

People often guesstimate their own life expectancy based on the age that their parents passed.  Genetics obviously has a bearing on longevity.  Modern medicine has also become a big factor in how long we can expect to live.  Diseases that were considered fatal 50 years ago are treatable or curable today.  For many people facing retirement and the end of a paycheck, the thought of someday running out of money is their biggest fear.  And there is no question that living longer increases the risk to your financial well-being.

The elderly typically incur costs that the young do not.  As we get older, visits to the doctor and the hospital become more frequent.  There’s also the onset of dementia or Alzheimer’s that so many suffer from.  As our bodies and minds age, we may not be able to continue living independently and may have to move to a long-term care facility.

We should face these issues squarely, especially as we approach retirement.  Too many people refuse to face these possibilities and instead hope that things will work out.  As the saying goes, “hope is not a plan.”

Here is a three step plan to help you remain financially healthy even if you live to be 100:

  1. Create a formal retirement plan. Most Financial Planners will prepare a comprehensive retirement plan for you for a modest fee.  We recommend that you choose to work with an independent Registered Investment Advisor who is also a Certified Financial Planner™ (CFP®).  Registered Investment Advisors are fiduciaries who are legally bound to put your interests ahead of their own and work solely for their clients, not a large Wall Street firm. CFP® practitioners have had to pass a strenuous series of examinations to obtain their credentials and must complete continuing education courses in order to maintain them.
  2. Save. Save as much of your income as possible, creating a retirement nest egg.  Some accounts may be tax-exempt (Roth IRA) or tax-deferred (regular IRA, 401k, etc.), but you should also try to save and invest in taxable accounts once you have reached the annual savings limit in your tax-advantaged accounts.
  3. Invest wisely. This means diversifying your investments to take advantage of the superior long term returns of stocks as well as the lower risk provided by bonds.  While it’s possible to do this on your own, most people don’t have the education, training or discipline to create, monitor and periodically adjust an investment strategy that has the appropriate risk profile to last a lifetime.  We suggest finding a fee-only independent Registered Investment Advisor to manage your investments.  They will, for a modest fee, create and manage a diversified portfolio of stocks, bonds, mutual funds and/or exchange traded funds designed to meet your objectives.

The idea of saving for a long retirement should not be avoided or feared.  With the proper planning and preparation, retirement gives us the opportunity to enjoy the things that we never had time for while we were working, and can indeed be your Golden Years.

What Is The Difference Between A Pension Plan And A 401(k)?

Both plans are designed to provide income for retirement.  There are some very important differences.

A 401(k) is a type of retirement plan known as a “defined contribution plans.”  That means that you know how much you are saving but not how much it is worth when you are ready to retire.  That depends on your ability to invest your savings wisely.  The benefit is that your savings grow tax deferred.  Many employers match your contribution with a contribution of their own, encouraging you to participate.

A pension plan is known as a “defined benefit plan.”  That means that you are guaranteed a certain amount of income by the plan when you retire.  The responsibility of funding the plan and investing the plan assets are your employer’s.

Because your employer is liable for anything that goes wrong with the pension they have promised their employees, many employers have discontinued pension plans and replace them with 401(k) type plans.  This shift the responsibility for your retirement income from the company to you.

If you have a 401(k) for your retirement and are unsure about the best investment options available to you, get the advice of a financial planner who is experienced in this field.

For more information, contact us.

Four “Hidden” Ways We Help Our Clients Save Money

We often tell clients that our long term investment objective is to provide them with a fair rate of return over time while working to minimize the amount of risk they take.  Part of that objective is achieved by finding ways to save them money.

Buying the right mutual funds can save clients a lot of money.  Many mutual fund families offer the exact same fund in several different “share classes.”  The primary difference between each share class is the expenses the fund charges the client.  After deciding which fund we want to buy, we choose the least expensive version of that fund.  This means that our clients keep a bigger share of the fund’s returns.

We also pay attention to the tax consequences of our investment strategy and work to minimize the taxes that our clients pay at the end of the year.  Occasionally we will sell some losing investments to offset gains in other investments.  At the end of the day, this allows our clients to keep more of their money.

We help clients understand how much they need to save for retirement.

For example, we might tell them that buying the new luxury car that they really want every three years will mean they have to work for another five years to meet their stated retirement goals. This helps them with their decision making.

 Making sure our clients understand how much they can safely spend and where they should take the money for their goals is a key value-added service that we provide.

 

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