3-Money Strategies for Life and Retirement

When you near retirement age, you will suddenly be involved in questions about your “withdrawal strategy”. This is the method by which you will pay yourself from whatever savings or investments you have stashed away for that magic day. There are 4-5 very common strategies for withdrawal. However, as I thought about the withdrawal options, the same strategies work to save your money. With the rising levels of inflation, saving money tends to be on people’s minds more right now. See if one of these strategies would work for your savings.

1. fixed dollar strategy - though money can get tight and every dollar counts, saving an exact dollar amount from each paycheck is a method many people prefer. It’s consistent. It doesn’t matter if you are saving $3.00 or $300.00 from your paycheck. Putting a consistent amount aside in a separate location works best for some brains.

This dollar amount can be saved in a jar in the kitchen, under your mattress, in a separate savings account, or in an I.R.A. Consistent savings are easy to plan for.

2. fixed percentage - If the amount of your paycheck varies each time, saving a specific percentage of the paycheck might make more sense. For example, retirees talk about paying themselves 4%. Religious people talk about giving 10% to their church. If money is tight choose 1%. If cash is flowing choose 15%. The importance is to choose one and stick with it. One time per year, or every time you get a raise, you can review your standing and change the percentage, but do NOT change the percentage every month.

3. Bucket strategy – Some people need the structure of categorization. They need to have a purpose for each bit of money they save. They can then choose how much to add to each bucket. For example most banks will allow you to have multiple savings accounts. Electronically, each account can be renamed. When my adult daughter tried this strategy, she was able to name each savings account as:

• Emergency fund: to use when the car battery fails

• Travel: to visit friends and family in other states

• Cats: to pay for routine and unexpected medical care for the family pets

• Retirement: to grow slow and small right now and be used to invest in an I.R.A at future dates

The bucket strategy dates way back to when people used cash. They filled different envelopes with cash: Rent, Utilities, Food, Entertainment, etc. and then they knew exactly how much money they could use for each category. When the entertainment envelope was empty for the month, they had to find other ways to play.

It doesn’t matter which method you use but respecting your money and saving back a bit each month can change a catastrophe into just another problem to solve. With the amount of debt skyrocketing in America, it makes it hard to save. So, remember this equation and kill the debt.

More debt = less savings less debt = more savings