★ Rich Habit #9: Saving At Least 10% of Your Income
This is part of our Rich Habits series, by best-selling author Tom Corley.
Be sure to check out all previous habits we’ve covered!
Before any bills get paid, successful people pay themselves first. They set aside at least 10 percent of their income into some savings, investment or retirement vehicle. They invest their money wisely, watch over their investments regularly and set realistic goals for their investment returns.
Successful people have high credit scores, know their net worth and monitor their personal balance sheet. They employ the services of experts like certified public accountants, certified financial planners or attorneys, and use these professionals to help maximize their returns and minimize their taxes.
Successful people have a retirement plan.
They participate to the fullest extent permitted by law in retirement plans. Many of these retirement plans allow individuals to put away, in a tax-deferred manner, a large portion of their income each year. If their company does not have a retirement plan, they create their own retirement plan by funding individual retirement accounts (IRAs).
They add to these accounts with every pay check. They have retirement goals. They monitor their retirement plan regularly and make course corrections in an effort to reach their retirement goal.
Unsuccessful people pay themselves last and have little saved for retirement.
They live pay day to pay day, spending every penny to support their lifestyle. They are poor savers and carry excessive amounts of debt. They have home equity loans and credit cards maxed out, and they can barely make the monthly minimum payments. They also have poor credit scores.
Unsuccessful people do not contribute to retirement plans. Some gamble excessively and view the lottery as their retirement plan. They take risks, which are either unnecessary or not well thought out. They don’t set aside 10 percent of their income and, consequently, when they reach retirement age, they do not have enough retirement savings to allow them to retire with security.
They rationalize that they cannot afford to set aside 10 percent of their earnings. They are unwilling to alter their lifestyle in order to save adequately. More often than not, unsuccessful people have no choice but to continue working well into their retirement years or rely on family or the government.
Save at least 10 percent of all your income, and live off the rest.
[EDITOR’S NOTE: While 10% is a great staring point, I’d push yourself to go even further to 20% or even 30% as time goes on. Any dreams you have of retiring early or traveling the world/etc will require much more than 10%. Though it will probably set you up just fine for a normal retirement age/life.]
[Photo cred: Marcin Wichary]