1. So far away – ‘I have decades to save and prepare for retirement. I will start once I am a little older and established.’

2. I want to spend my money – ‘I finally have a good job and I want to spend all of the money that I work hard for.’

3. Plenty of time to start thinking about retirement – ‘I don’t even know what my retirement life will look like. Once I figure that out, I will start saving for it.’

4. Other bills – ‘After my bills and student loans, the money for retirement simply isn’t there. I will save once I make more money.’

If you couldn’t tell, I think the reasons above are completely ridiculous. Now is the time to start saving and there are many reasons why. All of the reasons above will have you procrastinating and scrambling to get your future financial plans in check. Below are reasons why you should start putting money away for your retirement now:

1. Time is on your side – ‘The sooner I can start saving now the more money I will have in the future. I want to take advantage of my young age and put money away now. Compound Interest (interest paid or earned on the initial principal amount and on any interest accrued) is working for me not against me.’

2. You don’t have to contribute a lot – ‘Even the small amounts can be worth a lot in the future. It’s better to put away something rather than nothing. I can always increase my contribution as my salary and career grow.’ You can use this retirement calculator to see how saving today can impact your retirement.

3. You don’t have to play catch-up – ‘Starting now will mean that I won’t have to play catch-up when I am 30, 40, and 50. I have fewer obligations now than I will have then and it is easier to stash money away now.’

4. You won’t miss the money – ‘Depending on my company’s retirement plan, my contributions will be taken out of my check before I even see the money. It’s an easier way to save.’

If you aren’t convinced yet, check out this example from my favorite financial advisor Dave Ramsey‘s book Financial Peace Revisited:

Who Is Smarter – Ben or Arthur?

Ben, at the age of nineteen, invests $2,000 per year at an annually compounded interest rate of 12% for eight years until he twenty-six years old. For the next thirty-nine years, until he is sixty-five, Ben doesn’t invest a penny more.

Arthur, age twenty-seven, invests $2,000 per year for thirty-nine years until he is sixty-five years old. His investment also earns 12% compound interest per year.

At the age of sixty-five, who will have the most money?

Arthur, who started investing later, will have $1.53 million at sixty-five. However, Ben, who started investing earlier and for only eight years, will have $2.29 million! Arthur never caught up. START SAVING NOW!

Now we want to hear from you! How have you taken steps to prepare for your financial future?

-CKB

A mall shopping spree? VIP at the club? A cruise to Puerto Rico? These are things that you should spend your emergency savings on. After all, we are young and we can make more money in the future and save all the money back in no time….

NOT!!

Why Have an Emergency Savings?

While you can save for a shopping spree, partying, or a vacation (actually it’s preferred to save for things you want instead of using credit) that is not what your emergency savings is for. Your emergency savings is well….for emergencies. A major car repair, health care expenses, loss of a job, major home expense, death in the family, ALL of these are situations where you would want to tap into your emergency fund. Having cash on hand is a much better alternative than using a credit card, because you will ultimately have to pay interest on that credit card charge which will cost you more in the future.

LIQUID LIQUID LIQUID…and I Ain’t Talking About Water

You want to have your emergency savings in cash. Some people like to take their savings and put them in a Certificate of Deposit (CD), an IRA, or some other type of binding savings plan. Yes, you usually earn higher interest rates in one of these plans, but if an emergency does come up getting access to that money is not immediate. Plus, a lot of these types of plans have penalties for taking out money ahead of time. You want to have your emergency savings in an easily accessible savings account that you have unlimited access to. Of course, it’s not ideal to have thousands of dollars sitting in a savings account earning less than 1% interest, but it’s not there for a nice rate of return…it’s a cushion for a rainy day and a rainy day will come. Just make sure you place your money in an account that is FDIC insured.

It can be difficult to just put money away and not touch it, however having a nice cushion of cash can definitely ease your mind when it comes to life in general. Those who don’t put money aside feel every single bump and bruise that life can throw your way. For a non-saver, every speeding ticket, new set of tires, or lost cell phone can almost derail them. However, for those who have that cushion they can take life head on and feel comfortable knowing that they are better protected. Just make sure that when you tap into your savings that you make sure you replenish it. Saving money is a conscious and calculated process. It just doesn’t happen.

How much do you put away?

There are several different approaches to how much one should save:

1. 6-8 months expenses – this includes things like rent/mortgage, utilities, cell phone, debt repayment, insurance, gas, and food. Everything it takes you to live each month.
2. 2-3 months of take home salary saved – this is saving 2-3 months of your net pay.
3. Start off by saving $1,000 and then pay off ALL debt before returning to saving – this approach is suggested by my favorite financial advisor Dave Ramsey. You should DEFINITELY check out his site to learn his philosophy around saving, debt repayment, and ultimately building wealth. Some use a slightly modified version of this rule where they still save the $1K upfront, but then they pay off their high interest debt (debt above 7% interest) first and then return to saving. The latter rule has become more widely accepted, because with insane student loan debt these days, there’s no way you could pay off ALL of your debt only saving $1K along the way.

How to Start Saving

1. The easiest way is to set-up an automatic transfer with your online banking to automatically take some portion of your paycheck and automatically transfer it to savings. This way you don’t even have to think about saving.
2. Use a large chunk of money to kick off your savings. Tax refunds and bonuses are great ways to quickly build up your emergency savings and get it off to a good start. However, it will be those automatic transfers that will serve you the best in the long run. Yours truly has used both of these methods above to build savings.

As you can see how much you save really depends on how comfortable you are with saving money and what allows you to sleep at night. Regardless of your approach, just realize that it is important to have cash on hand and the more you have the better prepared you will be for life, because let’s face it…sh*t happens! We want to hear from you: What tips do you guys have to saving money? Have any of you out there fully funded your emergency savings yet?

-CKB