While most people yearn for wealth not all will achieve any significant levels of wealth in their lifetime.
I am of the opinion that anyone can build wealth, but for most of us building wealth will take time. It doesn’t come to most of us because of our natural abilities or talents or because we were born into a wealthy family. Instead it takes time, patience and perseverance.
Wealth building is not necessarily an easy process, but it can be done. One way to attempt to ensure your future wealth is to set up an automatic savings plan.
Leverage Your Automatic Savings to Build Wealth
Does your employer offer Direct Deposit of your paycheck? If it does you might consider using Direct Deposit to automatically transfer a certain amount (or percentage) of your paycheck into a savings account (or various savings accounts). It’s important to save for various large expenses, as well as for emergency needs and then of course, retirement.
For example, if you don’t already have an emergency fund you might consider opening a high-yield savings account, such as the Orange Savings Account, or a money market account and then setting up your paycheck to automatically deposit a certain amount (or percentage) every pay period into your emergency fund account.
It would also be wise of you to set aside a certain portion for any large purchases you plan to make in the future. If you have kids you might consider setting aside a certain dollar amount every month for their future educational expenses, for example. Of course you’ll also want to consider retirement. If you’re not already taking advantage of an employer sponsored retirement account (such as a 401k) then start. If it’s not something that your employer offers then start your own retirement account: a Roth IRA or a traditional IRA.
What Might All This Automatic Saving Look Like?
For simplicities sake let’s assume that your paycheck is currently deposited into your checking account to the tune of $1,000 every week. Now let’s assume that you don’t have an emergency fund yet and that your employer does not offer a retirement account, therefore you have decided to fund your own IRA. Also let’s assume you’re saving up for a new computer that you’d like to be able to pay cash for.
Since your weekly expenses are relatively low (about $400) you’ve decided to save a substantial amount of every paycheck. You want to put at least $200 every week into your emergency fund and you’d like to put at least $200 into your IRA as well. That leaves $200 after other weekly expenses and you’ve decided to put just $100 into it, leaving the rest as petty cash for you to play with throughout the week. You could set this up several ways. You could have the money deposited directly into your different accounts by your employer or you could put it into one account (such as your checking) and have it automatically transferred from there to your different savings accounts.
The advantage of having your employer Direct Deposit the amounts is that they should be able to support percentage based deposits. If you set it up this way then as your salary increases so will your savings, automatically. Check out this calculation I did from the retirement calculator over at Dinkytown.net.
As you can see from the calculator results if you save $800 a month from age 30 to 65 in an IRA account with a 10% average rate of return then you’ll have just over $3 million dollars in your IRA by the time you’re ready to retire. That’s not a bad amount, and keep in mind that is without ever increasing the amount you’re saving every month. Not to mention that if you are able to start saving before 30 you’ll be in an even better position.
Start Your Automatic Savings Plan Today
Don’t wait to get started. Set up whatever you need to and make your savings automatic. You’ll thank me for it. Trust me.