The Incredible Shrinking Paycheck
You’d like to save more for retirement, increase your emergency savings and pay off your credit card debt. But no matter how much you want to do the right thing, you find yourself spending your cash as soon as you earn it. Here’s an easy fix: Automate as many financial decisions as possible. Have the bank transfer a set amount every month from your checking account to your Roth IRA and savings accounts, and set up auto-pay for your credit cards. (Be sure to submit at least 10 percent more than the minimum due to pay off the principal sooner and limit interest charges.) The less you have to think about how to spend every dollar, the more likely you are to spend wisely.
The Stagnant Stash
The Delayed Reaction
Time is key to building your financial security. Let’s say you start saving $200 a month at age 30. You could amass more than $398,000 (assuming an annual return of 6 percent) by age 70. Wait until 31 to start, though, and you’ll have about $25,000 less. That’s the power of compounding. This concept works in reverse with loans. Spend 30 years paying off a $300,000 mortgage at a 5 percent rate, and you’ll owe nearly $280,000 in interest charges. Send one extra payment a year, and you’ll shorten the life of the loan by more than four years while saving nearly $50,000 in interest. When it comes to tackling your financial goals, whatever they might be, there’s no timelike the present.