Saving And Controlling Your Spending
What percentage of my income should I try to save?
There's a rule of thumb that people should save 10% of their income and I think that's a good rule that people should follow for saving. If they have a 41(k) in their employment situation they should try and save that much of their income, up to the maximum amounts that are allowed under the tax law. Unfortunately too many people today are not saving at all and in fact they're spending more than they earn, but saving is a critical element.
When should I start saving for retirement?
It's never too early to start saving for retirement. In fact, the statistics have shown that the earlier you start saving, the more likely you are to achieve financial freedom later in life. That doesn't mean that if you're further along in your career you can't start, it just means that you will likely not save as much over long periods of time. I have seen some calculations where if an individual, when they first, as soon as they graduate from college, starts saving, just depositing the maximum amounts of money into their IRA accounts, and they only do it for 10 years, and then just let that money that was in there that they've deposited grow using the effect of compund interest will end up giving these savers more money than somebody who started 10 or 15 years later and just continue to deposit those same amounts up to the date of their retirement. The compounding effect of earning's growth on investments is the most powerful tool that an individual can use to save for the long term.
What is a "budget"?
People can be intimidated by the process of trying to prepare a budget. They don't know how to approach it, they don't know what to do. But actually, in its purest form, a budget is a plan. It's setting down, on paper or in a computer program, amounts of money that you anticipate spending in the various aspects of your life
