repost­ed from: US News & World Report

by: Geoff Williams | Contributor

June 28, 2016


You’ve seen the num­bers. They aren’t pret­ty.

A recent sur­vey of 1,000 adults sug­gests that 66 mil­lion Amer­i­can adults have zero dol­lars saved for an emer­gency. That dove­tails nice­ly with a report that came out ear­li­er this year from the Fed­er­al Reserve, which looked at the eco­nom­ic well-being of Amer­i­can house­holds. And things are not going so well. About one-third of 5,695 respon­dents to a 2015 sur­vey revealed they would have trou­ble deal­ing with a $400 emer­gency.  Sound famil­iar? Start build­ing your sav­ings with some of these methods.

Start small. That’s advice from Mack­ey McNeill, founder and pres­i­dent of Mack­ey Advi­sors, a wealth man­age­ment firm in Belle­vue, Kentucky.

“If you himages (1)ave nev­er saved any­thing in your life, save $5 a week or $10 a week,” McNeill says, adding: “Pick a num­ber that, regard­less of dis­as­ter, you can achieve.”  After you do that, McNeill advis­es, “Put the mon­ey in a sep­a­rate account and review it once a month. After three months, con­sid­er an increase. After three more months, con­sid­er an increase again,” and keep repeat­ing.  “The rea­son peo­ple fail at sav­ing is they start too high. … So they set them­selves up for fail­ure,” she says. “Start small. You will be so excit­ed that you met your goal, you will auto­mat­i­cal­ly want to do more and achieve more. When you start small, you set your­self up for suc­cess. Suc­cess begets suc­cess. I have nev­er had any­one try this who did not succeed.”


[See: Your Month to Month Guide to Sav­ings.]

Reward your­self when you save mon­ey. This is impor­tant, McNeill says, advis­ing that what­ev­er the reward be, make it some­thing free.  For instance: If you save $10 a week, then every time you hit $40 saved, rent a movie at the library or take a walk in the park, she explains. What­ev­er you do, “make it some­thing that real­ly nur­tures you,” she says. “It does­n’t mat­ter what it is. A hot bath will work. But when you give your­self the reward, you are rein­forc­ing the behav­ior you want.”

Trim back your expens­es. One thing that prob­a­bly keeps most peo­ple from sav­ing more is that there may not be enough mon­ey to go around. That’s def­i­nite­ly the case if there are expens­es that could be eas­i­ly cut, or debt that’s weigh­ing you down.


“When talk­ing with clients that are begin­ning to put togeth­er a plan to save mon­ey, or begin their accu­mu­la­tion phase, the first thing I advise them to do is pay off any high-inter­est debt like cred­it cards,” says Dan Milan, man­ag­ing part­ner of Cor­ner­stone Finan­cial Ser­vices LLC, a wealth man­age­ment firm in Birm­ing­ham, Michi­gan.  “Pay­ing off high-inter­est debt is the most impor­tant first step in begin­ning any accu­mu­la­tion phase,” he says. “I con­sid­er this part of a sav­ings plan because every­thing you pay off, you are even­tu­al­ly sav­ing mon­ey on high interest.”

Make it easy. Assum­ing you have a bank – a Fed­er­al Deposit Insur­ance Cor­po­ra­tion study sug­gests that 9 mil­lion Amer­i­cans don’t – the eas­i­est way to save mon­ey is to set up a sav­ings account and then direct a spe­cif­ic amount to go reg­u­lar­ly from your check­ing account to your sav­ings account, says Michael Eisen­berg, a cer­ti­fied pub­lic accoun­tant and per­son­al finan­cial spe­cial­ist with Inno­v­a­tive Wealth Advi­sors in Enci­no, Cal­i­for­nia. “Every time your pay­check hits your check­ing account, you should instruct your bank to move a set sum direct­ly into your sav­ings account,” he says. “This makes it easy and seam­less.”  Even­tu­al­ly, he says, you won’t even miss the mon­ey because it’s auto­mat­i­cal­ly dis­ap­pear­ing, and you’ll get used to work­ing with the mon­ey going into your check­ing account.

Susan Howe, a cer­ti­fied pub­lic accoun­tant in Philadel­phia, echoes that advice. “Even a mod­est amount will add up quick­ly if you set it for a week­ly trans­fer. Just be sure there are no fees,” she says.


Try open­ing a 401(k) or an IRA. That’s what Leonard Wright, a wealth man­age­ment advi­sor in San Diego, sug­gests. In par­tic­u­lar, Wright rec­om­mends open­ing up a Roth 401(k) or a Roth IRA.  “This mon­ey grows tax-free for life, is not sub­ject to required min­i­mum dis­tri­b­u­tions when you retire and best of all, is tax-free when you need it – and can help with edu­ca­tion expens­es for your chil­dren,” he says.

The only down­side? Some 401(k)s and IRAs require you to have some mon­ey to start the account, like a min­i­mum deposit of $1,000, and if you have saved zero dol­lars, that may be a tough hur­dle. But not every 401(k) and IRA has a min­i­mum deposit – or some will waive that if you com­mit to pay­ing a cer­tain amount of mon­ey a month – so look around.

You also may want to check out myRA, a retire­ment sav­ings account from the Unit­ed States Depart­ment of the Trea­sury. It was designed for peo­ple who have had trou­ble sav­ing mon­ey and for peo­ple who don’t work for an employ­er that offers a vehi­cle for sav­ing for retire­ment. It has no fees, and you can open a myRA for as lit­tle as $25.

But McNeill notes that wher­ev­er you put your mon­ey, whether in a 401(k) or oth­er sav­ings account, “in the begin­ning, it’s irrel­e­vant,” – as long as you’re sav­ing mon­ey some­where. “What you are try­ing to do is cre­ate a new habit.”

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