Smart Spending and Saving Advice

November 19, 2022

Let’s say you earn $50,000 annually. At that rate, some $1,500,000 will pass through your hands over the course of a 30-year career. That’s right, you’re already a millionaire and didn’t even realize it. The trick, of course, is holding on to as much at that $1.5m as possible and putting it to work for you, earning more money on its own. This smart spending and saving advice will help you do just that.

Develop and Use a Spending Plan

Every endeavor is more easily accomplished with an organized plan. Take some time to figure out exactly how much money you have coming in each month. Then total up all of your essential household expenses — rent/mortgage payment, car payment, utilities, what have you. 

The difference between those two figures is what you have to work with in terms of developing and attaining your financial goals. Give every single dollar a purpose, whether it’s to pay bills, purchase food and necessities or save. Implement your plan and keep working on it. 

Avoid Using Credit Cards

Yes, it’s next to impossible to accomplish certain things in this society without using a credit card. But that doesn’t mean you should fall back upon it for routine purchases. Moreover, if you find you must use a credit card to make a purchase, do everything possible to pay it off in full before the card’s due date. 

Failing to do so will allow the card issuer to impose interest charges on that purchase, thus making it even more costly. The cost becomes even more exacerbated if you carry that balance from month to month. Interest charges get added to the principal amount, and you wind up paying interest on interest—effectively trying to outrun compound interest. 

This is why minimum credit card payments are so low. Interest rates on credit cards can run as high as 30%. Meanwhile, minimum monthly payments are typically as low as 3.5% or less. In other words, minimum payments barely cover interest charges. It can take nearly five years to pay off a $1,000 credit card debt using minimum monthly payments, and you’ll be out an additional $775 in interest payments. 

Testimonial after testimonial at illustrate how readily credit card debt can derail all of your financial goals. 

Create an Emergency Fund

Your first priority should be establishing an emergency fund of at least six months of your household expenses. This money should be deposited into a high-yield savings account or some other account that pays more than a basic savings account, which is both stable and easily liquidated

This will help you avoid going into debt if you experience an interruption of your primary source of income. It will also spare you from the trap that is credit card debt should some unforeseen urgent expense pop up.

Set Long Term and Short Term Goals

With your emergency fund in place, putting money away for retirement should become your next priority. Putting that money away each month should come before establishing college funds for your kids, buying new cars, and everything. 

Experts suggest aiming to have at least half your annual salary put away by the time you turn 30. It should equal three times your salary at 40, six times at 50, eight times at 60, and 10 times at 67.

Figure out how much money you’ll need to retire comfortably, determine what you’ll need to do each month to get there, and that becomes your long-term financial goal. With that plan in place and functioning steadily, you can then consider short-term goals for which you will put cash away  —such as saving up to purchase a home. 

These four tips are the basics of smart spending and saving advice to help you reach your financial goals. The Federal Trade Commission website offers lots of tips on how to make your dollars serve you better. 


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