Last week, we came to the conclusion that God does want us to save money, at least for non-selfish reasons. So, what are the best reasons and ways to save up money?
Saving for Retirement
In America, saving for retirement has been pushed hard upon the masses, but technically the Bible never mentions retirement. In fact, the Bible makes it obvious that you must always be willing to work:
For even when we were with you, we would give you this command: If anyone is not willing to work, let him not eat.
2 Thessalonians 3:10
However, retirement isn’t entirely unbiblical. For one thing, you did work for that money that you saved up and you diligently saved it so that you could have a life after retirement. Also, retirement shouldn’t mean that you stop working. It means that you stop working for a paycheck, and therefore are free to work more for God’s kingdom. I wouldn’t make your future retirement into an excuse to not work for his kingdom now, but you’ll certainly have more time and freedom after retirement, so it’s a good goal.
Knowing this, I wholeheartedly encourage you to save up for retirement. This isn’t one of those things that you should try to squeeze into a single blog post, since retirement savings has many factors and variables that I can’t fit into a post, so I would recommend discussing this with a financial advisor. I do have some tips that you can mull over and bring to your financial advisor, though.
Start Early: Thanks to the compounding nature of interest, you’ll get far more out of your retirement savings by starting as soon as you can. When investing in high interest accounts (8% or more, which you should be able to achieve over the long haul with any good investing), if you start at age 25 and invest for 20 years, then stop investing and just let the interest take over from there, you’ll have more money saved than if you start at 35 and invest twice as much for 20 years. So even if you can’t max out the amount you’re saving, get started now.
Use Your Company’s 401K Matching: If the company you work for offers a 401K and will match some of the money you invest in it, take advantage of it! One company I worked for would match 100% of the money I invested in my 401K, up to 2% of my paycheck. At that point it’s a no-brainer: I ought to invest 2% of my paycheck into that 401K! That’s instant 100% interest! You can’t match that anywhere else. Even with the taxes being taken out when you eventually withdraw that, you’ve gained a huge amount of money from it.
If I remember correctly, the company I worked at before starting this blog only matched 25% of what I put into the 401K, but even that is an insane profit compared to what you’re likely to get investing anywhere else. Take advantage of this. If there’s a limit on how much they’ll match (e.g. 2% of your paycheck), then stop there. The biggest benefit from company 401K’s is the matching. After that, there are generally better places to invest.
Get A Roth IRA: Roth IRA’s use your post-tax money to invest and have certain restrictions about how much you can invest and pull out of the account, so you won’t be taxed for any of the interest accrued when you withdraw, unlike a traditional IRA or a 401K.
Diversify: Don’t put all your eggs in one basket, as they say. Find multiple ways to invest because no one investment can guarantee an interest rate, except CD’s, which have generally far worse interest rates than what you can get with IRA’s and such. By using multiple investment accounts, you won’t be affected as much if one of them does far worse than expected.
Saving Up An Emergency Fund
The best tip I can give here is do it quickly. I’ve seen plenty of little tricks for saving up money without feeling like you’re taking that much money away from your other expenses (one example), but these tend to take a full year to save up. Emergencies don’t like to wait until you have an emergency fund. The quicker you can save up the money, the better, because you’re more likely to have it when you need it. If you’re going to follow a plan similar to this one, I would turn it around and invest the large amounts first and trickle down as you get closer to your goal.
Keep it stocked: If an emergency comes along and drains some (or all) of that emergency fund, make sure to stock it back up quickly. Just because you had one emergency, doesn’t mean the next one won’t be right around the corner!
Start with $1,000: $1,000 tends to be a decent place to start your emergency fund. Most emergencies will be at least mostly covered by this. However, once you have your debts paid off, I would consider raising this to as much as $5,000 or even more if you can spare it.
Saving Up For Large Purchases
Large purchases can be pretty much anything, saving up for a down payment on a home, a car, a computer, college, etc. In any case, the strategies are largely the same.
Do the math: Figure out how soon you want/need to have the money, find a calculator that can take interest into account (or skip the interest if you’d like to be surprised to have a bit extra afterward), and figure out how much you’ll need to save each paycheck. Then do it! Pretty simple, really.
Consider using your Roth IRA: A Roth IRA doesn’t have any penalties for pulling out money early unless you try to pull out the interest accrued. If you don’t mind not being able to pull the interest out, and you aren’t already maxing out your Roth IRA, this may be a good place to save your money. You’ll want to take into account that you may actually lose money during the time that you’re saving up for the large purchase since IRA’s are supposed to work better for the long term, but are rather volatile for short-term savings.
Use specialized accounts: I really need to look into this more myself because I don’t know much about them. I am pretty certain, though, that there is a type of savings account that can be used specifically for saving up for your children’s college expenses and offer some benefits over other methods of saving when used properly.
Last But Not Least
Don’t Give Up. Saving money is hard, especially when we see so many things around us that we want to have right now. But if you’re diligent, trust God for help, and try to eliminate unnecessary expenses, you’ll end up putting yourself in a much better place financially, and your future self will thank your present self for putting forth the effort.
In the end, if you can’t find a way to save much, don’t worry.
“Therefore I tell you, do not be anxious about your life, what you will eat or what you will drink, nor about your body, what you will put on. Is not life more than food, and the body more than clothing? Look at the birds of the air: they neither sow nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not of more value than they? And which of you by being anxious can add a single hour to his span of life? And why are you anxious about clothing? Consider the lilies of the field, how they grow: they neither toil nor spin, yet I tell you, even Solomon in all his glory was not arrayed like one of these. But if God so clothes the grass of the field, which today is alive and tomorrow is thrown into the oven, will he not much more clothe you, O you of little faith? Therefore do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the Gentiles seek after all these things, and your heavenly Father knows that you need them all. But seek first the kingdom of God and his righteousness, and all these things will be added to you. Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.”
Matthew 6:25-34
God will provide everything you need. Be wise stewards of the things God has given you and you will be blessed.
