Making a Limited Budget Work Today and Tomorrow
By Shannon M. Medisky
It’s common knowledge that everyone should save for and prepare for retirement. Most parents would like to be able to save towards their children’s future college costs as well. Problem is, in today’s economy, the vast majority of household budgets are stretched so incredibly thin, that there’s usually not even two cents left to rub together let alone put away for future needs. As the saying goes, the squeaky wheel gets the oil, and it’s easy to not hear or even completely ignore the distant cry of future needs when you’re struggling to meet the clamoring, nagging needs of today. All is, fortunately, not lost, however. Use the tips and strategies that follow to help you stretch today’s dollar now and minimize the cost of tomorrow.
Any Start Is a Start in the Right Direction
Forget feeling guilty about not being able to stash away more savings. As with anything in life, the first step is often the hardest. The sheer fact that you’re beginning to anticipate and prepare for future needs puts you that much farther ahead. Even if it’s just a token dollar or two, get in the habit now so that when you are capable of increasing your savings deposit, you’re already used to doing so.
Think Small over the Long Haul to See Bigger Results
Start early enough and you needn’t necessarily jeopardize today’s budget for tomorrow’s future financial needs. Regardless of the future expense, the earlier you begin saving, the smaller deposits you’ll need to make in order to reach your target financial goal. This is true for two simple reasons. One, you’ll be making deposits for a longer period of time, spreading out the total target savings amount. And, two, you’ll have the ability to accrue interest for a longer period of time which can really add to your bottom line and make your job of saving that much easier.
Get Help Wherever You Can
Take advantage of employer retirement programs that allow you to contribute via pre-tax payroll deduction. A true win-win situation, you’ll likely never miss the extra funds in your paycheck if you’ve never had them to begin with and you’ll lower your taxable income at the same time. If your employer offers retirement matching, make sure you take advantage. Failure to do so is the equivalent of giving free money away. If you have children, look into investing in a 529 plan (also known as “qualified tuition plans”). Not only do they aid in the process of stashing away the savings today for tomorrow’s future tuition bill, 529 plans can actually lock in the price of today’s tuition and allow your child to take advantage of it tomorrow potentially saving you (and your child) thousands of dollars. Parents who take advantage of qualified tuition plans do incur fees, and most plans also have limited enrollment periods each year. The good news is that even though each state offers their own 529 plan, parents are not locked into their own state’s plan. A word to wise parents everywhere, take the time to comparison shop the various state plans and determine which one best suits your and your child’s potential needs best. For more information or to compare the various state plans, visit the College Savings Plan Network (CSPN) site.
Don’t Overlook the Standbys
There’s a lot to be said for not fixing what isn’t broken. If you simply don’t have the leftover funds each month to make contributions to a retirement or college savings plan, stick with making albeit small deposits in a traditional savings account or consider purchasing savings bonds to help your money grow with much less expensive contribution amounts. After all very little bit counts, and if you start counting (and saving today) you’ll have far less to worry about tomorrow.
Photo credit: the queen of subtle
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