Tag: strategy

Four Strategies to Help You Start Saving

Pay off high-cost debt.  The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates.  For example, if you have a $3,000 credit card balance at 19.8 percent, and you only pay the required minimum payment of 2 percent of the balance or $15 whichever is greater, it will take 39 years to pay off the loan. 

The personal saving rate in America in June of 2021 was 9.4%, which is a good rate of saving.  However, some families are not saving adequately for retirement, and lower-income households do not have adequate emergency savings for unexpected expenditures such as car repairs or medical bills. 

Saving must become a Priority

The mindset of saving needs to change.  Saving is an important part of financial security and a spending plan or budget can help you save. 

This can be done by setting saving goals and then developing a plan to meet the goal. 

Here are four saving strategies that may help get you started in the right direction:

  1. Pay off high-cost debt.  The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates.  For example, if you have a $3,000 credit card balance at 19.8 percent, and you only pay the required minimum payment of 2 percent of the balance or $15 whichever is greater, it will take 39 years to pay off the loan. 

With accumulating interest, you will pay more than $10,000 in interest charges.

  • Buy a home and pay off the mortgage before you retire.  The largest asset of most middle-income families is their home equity.  Once these families have made their last mortgage payment, they have far lower housing expenses.  They also have an asset that can be borrowed against in emergencies or converted into cash through the sale of the home.
  • Participate in a work-related retirement program.  If you participate in a work-related retirement program such as a 401k plan, with a dollar-for-dollar match, you will likely receive an annual yield of greater than 100 percent of your investment.  You save $100 and get $200 or more with the employer match.
  • Outside of work, save monthly through an automatic transfer from checking to savings.  These savings will provide funds for emergencies, home purchases, school tuition, or even retirement.  What you don’t see, you will probably not miss.

Once you realize that you need to save, develop a saving goal.  Then develop a plan to meet the goal. 

If you do not have an emergency fund, that should be your first goal.  Build up a $1000 emergency fund. 

By using the strategies above, you could, in no time, be on your way to meeting your goal and improving your financial situation.

A Household Budget Strategy

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, one thing that beats strategy is culture.  Actually, Drucker said, ‘Culture eats strategy for breakfast.”  A good spending plan strategy, how you plan your spending or how you work your money, can be affected by your culture. 

I love the game of chess.  It’s an interesting and intriguing game in that you use the same pieces, but every game is different.  I also like that; It’s a game of strategy and planning.  That is because I believe a good strategy, or plan of attack, can do almost anything.  It can even help your spending plan. 

According to Peter Drucker, a management consultant, author, educator, and the described founder of modern management, one thing that beats strategy is culture.  Actually, Drucker said, ‘Culture eats strategy for breakfast.”  A good spending plan strategy, how you plan your spending or how you work your money, can be affected by your culture. 

Culture is defined as a shared understanding that emerges from shared experience.  Its customs, social institutions, and achievements of a particular people group.  I could go in so many directions here as research has shown that, for example, people get their financial advice from family and friends most often.  And these are the people who most often are our culture and help make your culture.  Just know that culture plays a significant role in how we manage our money.  It’s not right or wrong it’s just a factor.

Budgeting Strategy

One of my budgeting strategies is to consistently work with my spending plan so that I stick to it. Another strategy could you could use might be the 50 30 20 strategy made popular by Senator Elizabeth Warren where 50% of income is spent on needs, 30% is spent on wants, and savings makes up the last 20%.

Creating a spending plan that works, is a process and what I mentioned above should be done to help you in the process of making a winning spending plan.  Your strategy is how you go about the process.

Culture Trumps Strategy

Sometimes we can come to a place, for example, where we do not track our spending and do not stick to the spending plan and become so good at not doing what we know we need to do to manage our money better.  We actually prevent ourselves from moving forward with our money.  According to the Harvard Business Review, culture is the habits that allow for cooperation by assumption rather than by negotiation. Culture is not what we say but what we do.  Culture is based on values.  It is what we value that creates our culture.

When we do not Follow Through on Our Budgeting or Spending Plan Strategy

For whatever reason, when we don’t budget or track spending or do not follow up on the spending plan, you are allowing it to beat you.  Creating a spending plan that works for you and your family is a process.  Your strategy is how you go about the process.  How you tackle those things that need to be done to make your spending plan successful in your household. 

Do you have a Budgeting Strategy?

Suppose you are spending your money with a plan and tracking your spending and following through on your budget, great.  If not, the great thing about budgeting is that you can start today doing those things that will help you win with money.  And if you do not have a spending plan create one today. 

Share your spending plan strategy and subscribe to my blog and learn how to create a winning and manageable spending plan for you and your family.