Getting Started: I haven’t saved a dime. Where do I begin?
Two good places to start your financial plan are your company retirement plan and your spending habits. If you have a company retirement plan make sure to schedule a meeting with your employee benefits person to learn about your options. One good rule is to “pay yourself first.” So make it a goal to save 10 to 15% of your income towards savings. Or, save “until it hurts”–that point when you know you cannot save anything more. If you’re unsure how to invest your 401k, read here.
One free site to track your spending habits is http://www.mint.com, which aggregates financial data (transactions, account values,etc.) from your banks, credit cards, investment accounts, and other financial institutions. By tracking your spending, you may see some potentially alarming trends that will help you recognize where your hard-earned money is disappearing to.
Now that you know where you are spending your money, write down some goals for yourself by thinking in terms of short-term (3 years or less), medium term (4-6 years), or long-term (7 years +) goals. Some examples of short-term goals may be to pay down debt within 12 months or to establish a cash reserve of 6 to 12 months of non-discretionary expenses. A medium term goal may be to save toward a down payment on a home in five years. An example of a long-term goal is to save $500,000 toward retirement in 30 years or to save $50,000 for your child’s college education in 12 years.
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