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Need More Money? Four Moves to Consider

Author: Wealth Management Systems, Inc.

A common question Financial Advisors hear from clients is, “How can I save more than I'm saving now?”

Fortunately, there are several ways you can accomplish that goal with a bit of professional help.

Consider the following:

Monitor expenses. Lowering your expenses by a modest amount such as 1% could allow you to boost your savings initiatives as much as a comparable increase in pay.

To gain insights into your current spending habits, consider downloading a budgeting app for your smart phone. They're much easier to use than they used to be and make expense tracking very simple. For example, many apps allow you to record your income and spending on the go, incorporating information from various accounts, in order to have an up-to-the-minute overview of your financial standing each day. You can then look for inefficiencies--and ways to economize.

Reduce credit card expenses. On average, each US household with credit card debt owes a balance of more than $15,000.1 You can eliminate such debt faster--and start saving more--by paying more than the minimum monthly amount on your credit cards each month.

For example, assume you have a $1,000 credit card debt with a 12% interest rate. By paying $20 each month, it would take 67 months to eliminate the debt and would cost you $353.43 in interest. But by doubling your monthly payment to $40, you would be out of debt in just 27 months. Your interest costs would be less than half--$103.28. Then, when you finish paying off your balance, redirect the money you'd been spending on debt each month to a savings or investment account.

Another way to tackle debt expenses aggressively is by consolidating credit card balances to a single, lower-rate card. Comparison shop for the best rates, but beware of “teaser” rates that start low then jump higher after an initial introductory period ends.

Boost contributions. If you participate in a workplace retirement plan, consider increasing your contribution by an additional 1% or 2% of income. Even if you think that may be too much, try it out for a few months. The extra effort could make a big difference down the road: Contributing even $20 extra each week could provide you with an additional $87,493 after 30 years (before taxes), assuming 6% annual investment returns.2

Use windfalls wisely. While it may be tempting to spend a windfall--such as an inheritance or workplace bonus--on something fun, it's probably a better idea to use the money to enhance your long-term financial standing. For example, assuming you invest a $2,000 windfall in an account earning a 6% annual rate of return, it could grow to $2,698 after 5 years, $6,620 after 20 years or $12,045 after 30 years (before taxes).2

At Morgan Stanley, we can help you implement effective strategies for reducing expenses and set up customized savings and investment plans to help pursue your goals. Call your financial advisor to talk about the best way to get started.

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