Instilling a Discipline
Some of the most successful financial results are achieved with a simple formula of deciding on a wise strategy and following it religiously. It often seems that the following it part can be harder than the deciding on it part, especially if the following it part is inconvenient or causes us to feel as though we are making too great of a sacrifice. Here are some ideas that can help provide that discipline.
Automatic Recurring Transfers to Your Savings Account
Let's face it: writing a check or going to a branch every month to take money out of your checking account and deposit into a savings account is inconvenient. And the chances of missing a month or stopping completely are high. Why not just have BB&T handle it for you? It is free and easy with online banking. After you've enrolled in online banking, simply log on, click the transfers tab and follow the steps to set up recurring transfers from your checking account to your savings account.
Retirement Plan Contributions
By having a portion of your wages withheld and deposited into a 401(k) or 403(b) retirement plan, you accomplish several things. You save every pay period, you pay less income tax because the contributions are not included in your taxable income and the earnings on the funds are tax deferred.
Dollar Cost Averaging When Buying Mutual Funds
This simple strategy simply involves investing a constant amount in a mutual fund every month (or on some other time frame). Most mutual fund companies offer dollar cost averaging programs. Dollar cost averaging is a convenient way to consistently save. And merely because of the mechanics, you buy more shares when the price is lower and fewer shares when the price is higher. The result is a lower average cost basis.
Value of Good Financial Habits
Time is money. Compound interest—earning interest on your interest—has often been called one of the wonders of the financial world. The more time your money can work for you, the more productive it will be. A simple rule of thumb is that money doubles when the product of the earnings rate and the number of years equals 72. At 6%, money doubles in 12 years. At 8%, money doubles in nine years. At 7.2%, money doubles in 10 years.
You may not be able to control how much you earn on your money, but the decision of how long you want your money to work for you—when you start—is totally up to you. And there can be no doubt. Sooner is better than later.