Simple Savings Secrets Every Investor Should Know

What are these simple savings secrets? Why do they work? And how can you take advantage of them? We each have our own shorthand for these secrets. How we refer to them depends on our upbringing, our education and, to some extent, our own personal values.

Here are the most important simple savings every investor should know.

# 1. Pay Yourself First. Here's another deceptively simple secret. We often have to prioritize, and too often we sacrifice our own needs for the needs of others. When it comes to saving for retirement, not only is it OK to be selfish, but your very survival may depend on it. Remember, you're alone on that sheer cliff. You can't count on anyone else. It's your responsibility alone. Do yourself a favor. Pay yourself first. We advise clients to "save first over all other purchases, as if it was a bill you owed. Pay yourself first. Make room in your budget to save for retirement before the discretionary spending". You can't afford not to. Paying yourself should be an automatic first priority, just like any other bill.

#2 . Make a Commitment. The best way to commit yourself is by stating a specific goal and then coming up with a plan to attain that goal. Start by establishing the objective of the money (in this case, retirement). The plan need not be elaborate. In this case, it can be simple as "saving". The point isn't the precision, it's simply the fact that it's easier to plan for an event (like retirement) if you start earlier. Planning for retirement should begin decades before you plan to retire.

#3 . Spend Less Than You Earn. We tell clients to "live on less than your means allow".

#4 . Start Early. It's funny. A lot of young savers get tripped up worrying too much about investment choices rather than simply starting to save. In reality, it's better to just start saving with no undo emphasis on investing. It’s about time, no timing. In other words, time heals all poor investment decisions, so the earlier you start saving, the less critical investment performance will become. Start now - something - anything. Make it easy and automatic: set up a regular transfer to occur as soon as your paycheck hits your account that deposits money directly into your investment account.

# 5. Save Money by Using Tax-Deferred Savings Vehicles. Almost everyone has heard of the 401k or the IRA. The government allows you to skip out of paying taxes this year for any contribution you place in these vehicles. Of course, you'll still have to pay taxes when you finally take the money out of these accounts, but, hopefully, you'll be in a lower tax bracket then. More importantly, you can actually increase your net take home pay (including the amount you save in these tax deferred accounts) by saving in these tax deferred accounts. Federal income taxes are not withheld from regular 401k contributions. For example, a $100 contribution may only cost you $85 in take-home pay. (However your actual deduction may be more or less depending on your income tax bracket, number of withholding allowances, etc.)

#6. Always Grab the Free Money. When a company offers to match any contribution you make, take full advantage of that match. Save early - as soon as you have a job - and take full advantage of employer matching. Take advantage of employer matching in retirement accounts. Don't leave money on the table.

#7. Now Save More. There's always a way to save a little more. Everyone should aim to save a minimum of 10% of every paycheck. It's amazing what following these seven simple rules can lead to. Now that I’m older, I can see firsthand how following this sage advice has helped not only me, but many of our clients as well. And to think, it all started with one step.

You have to do it and do it now. You might want to wait for government programs to help, but government programs may not be there in the future, so you have to do it yourself.

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The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent financial advisor. The content is derived from sources believed to be accurate.