How to Save Money with No Hassles

 In Personal Finance

how to save money

Struggling to learn how to save money? You’re definitely not alone. However, without the ability to sock money away, your financial future is not only in jeopardy, but you might not even be able to retire when you planned (or at all).

To help ensure that you’re able to realize financial independence and live the life you deserve, let’s take a look at some of the most important tips for saving money.

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The Importance of Setting an Achievable Goal in Learning How to Save Money

Perhaps the most important thing in how to save money is being able to set an achievable goal. This will require that you have an accurate understanding of your expenses, the luxury items that you purchase regularly, and where you can cut costs.

This will also mean changing your thinking about investing in general. Rather than the more common asset allocation approach, you should use the asset dedication approach. In this method, you have a portfolio consisting of three categories. These are cash, stocks, and bonds.

Each asset is matched to a particular goal in your life (after your initial goals are set, of course). This allows you to set your asset allocation based on specific goals, rather than nebulous mathematical formulas.

For example, you might decide to simply set a goal to save $100,000 within a five-year period. In this effort, individual bonds with specific target dates help ensure that you’re able to reach those goal within the given time.

Minor Setbacks Will Occur

Whether you’re just learning how to save money, or you’ve been putting some aside for years, you will eventually face minor setbacks. Don’t let these “get to” you. They happen, no matter how effective your planning or goal setting might be.

However, if you’re able to limit your exposure to the fluctuations of the stock market and take advantage of the laddering capabilities of individual bonds with specific target dates, those setbacks will be minor and will not negatively impact your financial future.

Automation Works Wonders

It’s natural – life gets in the way of saving money. You might forget to put money into savings one month or to make your investments the next month. It’s just part of being human.

However, those missteps can have a cumulative effect over time, resulting in a significant impact on your financial future. There’s a solution, though.

You can automate your savings and investing activities by working with a robo-advisor. Robo-advisors provide automation for investing, but also offer you the ability to hone in exactly on how much you need to save each week and each month.

This software will also calculate automatically how much you need to leave in your accounts in order to pay for expenses, and will automatically transfer money to savings accounts or investment accounts to improve your financial situation.

saving for retirement

Give Yourself a Reward Even Now and Then

Saving without any return for your hard work can be challenging and frustrating. It ultimately makes you feel as though you’re slaving away for nothing in return.

What good is it if you’re all work and no play? You can get around that by rewarding yourself for reaching small milestones.

For instance, take your significant other out to dinner, or plan a night out. Do something that you enjoy, and you’ll find that you look forward to reaching those milestones.

This does two things for you – it ensures that you’re getting something out of your work, and it actually makes it easier to save. After all, if you look forward to the reward for reaching a milestone, you’re more likely to make progress towards that milestone.

After all, if you look forward to the reward for reaching a milestone, you’re more likely to make progress towards that milestone.

Ditch Your Savings Account

If you really want help in how to save money, you should consider ditching your savings account. Yes, you read that correctly. Rather than putting your money into a bank that offers virtually no growth (savings account interest rates are abysmally low), you can put your money into high-quality corporate bonds.

Of course, you do need to ensure that you’re investing in individual bonds, and not bond funds, as they’re not the same. With an individual bond (not a bond fund), you can several advantages.

First, you’re able to put your money into an investment vehicle with a specific return amount. You know exactly what you’ll get back.

Second, you’re able to know exactly when you will get that return. This allows you to plan for your financial future, ladder individual bonds together to create a constant stream of income, and more. It’s best to avoid

It’s best to avoid bond funds, though. While they seem to offer you the ability to put your money into a number of different areas, the fact remains that you do not have a set return, nor do you have a specific maturity date. It’s also possible that you’ll lose money over time.

Bonus Tip: Focus on Asset Dedication

We touched on asset dedication previously, but it bears further scrutiny, particular for those in the late accumulation phase of their lives.

Again, this method avoids the pitfalls and problems inherent with the older asset allocation approach. Here is a brief example of how this might work.

For an investor aged 50 years old, with an annual income of about $ 180,000 annually and goal of both protecting the wealth he’s built and retiring early at 60, asset dedication would start by answering the question of how much he would need to retire early.

The answer is $2,000,000 in savings. If he currently has $1.3 million saved, he would need to save about 20% of his gross income. He would need to put just $2,200 into dedicated portfolio of bonds monthly over the next decade. The remaining $800 of his earnings would be put into riskier options, such as the stock market.

With this plan, it becomes possible for our hypothetical investor to retire around age 60 with $2 million plus. As you can see, saving money combined with using the asset dedication method can help ensure that you’re able to succeed financially.

early retirement

Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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