Saving money, simplified
Here are five smart money moves to help you achieve ongoing financial wellness:
1. Pay Yourself First
This may seem confusing at first glance but paying yourself is crucial! How do you accomplish it? Consider allotting and routing a percentage of your paychecks into a high-yield savings account or investment account. Make it automated too so it automatically happens without any thought! That way, instead of receiving 100% of your pay into your checking account where you can more easily spend it, a portion has already been set aside as savings. You’d be surprised at how quickly this one step can transform your finances.
2. Planning for Taxes
This is a big one for business owners and the self-employed. When a self-employed person makes $1.00 pre-tax, they typically net somewhere between $0.70-$0.80. This can vary depending on their tax and entity status, but income tax must be paid! The same logic applies to taxes resulting from capital gains.
When an investor sells a capital investment like stock or real estate, taxes are usually the last thing on his or her mind. Usually, there are plans for the proceeds in place already, but do yourself a favor and set some of the profits aside for taxes. The last thing anybody wants is to owe a large tax bill come April they were not prepared for. The high-interest rates and penalties that the IRS levies on past due tax is an even better motivator to be tax smart and conscious. If you have any questions on your taxes or what you may owe, seek professional help from a CPA to help clarify that picture!
3. Automating Investment and Expense Payments
Undervalued and infrequently discussed, the simple act of automating both expense and investment payments can contribute to your bottom line over time. First, it frees up your valuable time by completing tasks automatically. Next, it protects people from themselves — and the temptation to overspend before handling expenses and allocating capital for investment. Taking action to automate your investments and expenses can help get your finances running like a well-oiled machine. Automating leaves little room for human error as mentioned before!
4. Spending Within Means
Are you spending within your means, or aren’t you? See the three smart money habits above. They will help to make sure spending is under control. Taking a measure of wants versus needs can help to determine what is a necessity. Having a budget and ensuring that paying off debt is prioritized over frivolous spending can be a beneficial and sobering financial exercise. Having the budget written down is a great way to visualize and put hard, physical numbers to what is being spent.
For example, a personal crutch of mine is spending money on convenience, especially food. I joke about it, but I could keep one of my favorite fast-food restaurants, Culver’s, in business by my lonesome. After tracking for a couple of months how much I spent at the establishment, I was shocked. Seeing the physical number really put things in perspective for me and showed I had to change my habits. I recommend doing the same because a lot of the time, it’s the small things that add up without people truly understanding how much they spend over a month or two.
5. Net Worth Tracking
The ultimate number that depicts an individual’s overall financial picture is their net worth. By deducting all debt from assets, we can come up with this number. By tracking it periodically, patterns emerge, opening the door for adjustments and optimization. We can help you do this! Keeping track of this valuable metric can help you achieve financial goals and strive for financial independence.
These are just a few smart money habits that we wanted to mention. If there is anything that we can do to help streamline your finances, please give us a call. As always, we’re here when you need us.
The Gasaway Team
7110 Stadium Drive
Kalamazoo, MI 49009 (269) 324-0080 FAX (269) 324-3834
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