SAVING A PERCENTAGE OF YOUR INCOME MAY YIELD A BETTER OVERALL RETURN
When I first reviewed the 52 week money challenge I thought it looked like a fun and interesting way for an individual to sock away some money by the end of the year. It essentially goes like this, each week you'll add one dollar to the amount your saving with a starting point of one dollar.
The first week starts out at $1.00, the last week is $52.00 dollars and when you add all of the weeks in-between you get to a grand total of $1,378 saved by the end of the year.
I'd endorsed the idea initially, with the premise being it looks like a good option for individuals to get in the habit of saving money, which is a huge step towards gaining financial security.
In hindsight, it feels like a temporary band-aid that doesn't do enough to cement in the practice of saving because for many people find that midway through the challenge they are saving a higher percent of their income than they can feasibly do. On the flip-side of that, it doesn't hold individuals accountable to saving the proper amount if they are in a financial position to do so.
For someone new to saving money, the first thing I suggest is cleaning up their budget. Find areas to trip unnecessary expenses, cut down on bills and repay burdensome debts. Getting into the mindset that you won't settle for owing money is a crucial piece of the puzzle. You've got to be comfortable drawing a line in the sand and saying you've had enough! It takes a solid commitment and strategy to dig out of debt, it takes equal effort to develop essential savings habits.
Which leads me to what I feel is a solid solution for saving money. Save a percentage of your income. The most common minimum savings target you'll typically find is 20%. I say, for the individuals that are new to savings, fix your budget first and find a comfortable number.
For example, if you net $40,000 a year, it's unlikely that you'll be in the position to save 20% of your income if you're new to saving money. While it would be great to have an extra $8,000 in savings in your first year, you'll likely be working on multiple areas of improving your financial health and setting an unrealistic savings target could backfire.
About half of all American's have nothing saved for retirement and many of those individuals have nothing in their retirement account.
Instead of increasing by $1 a week for 52 weeks, save a percent of your net income. Shoot for a minimum of 5%. I feel that novices to savings should be able to free up at least 5% of their income by eliminating unnecessary spending. Do this until you have created even more breathing room between what your money going out and coming in is. You may find, after 6 months you can increase to 7% and maybe more.
Incrementally move that number up to what your budget allows. If you pay off your unsecured debt such as credit cards, collection debt and medical debt, roll a large portion of that right into your savings.
While I suggest to you to have 5% as your minimum initial benchmark, I won't cap my suggestion. Save as much as you can until you hit your next goal of having your emergency savings fully stocked.
Make it automatic if at all possible. Have your bank automatically set aside a percent of your paycheck right into your savings account. Do this until you have at least 6 months of income saved up. Seriously, before you get retirement savings locked down, you need to be prepared for the unexpected and 6 months of income saved is a great benchmark to shoot for.
It will take time, it won't be easy, but it will be worth it.
The 52 week challenge just feels like a bit of a gimmick to me. I get the point, but it feels flawed. Try setting your sights higher and more even keel. Over time, setting an automatic savings percentage from your net income will yield far greater returns. It will take more effort to free up your budget but if your going to take financial independence seriously it won't come without sacrifice.
Getting to the top won't be easy but the reward will be priceless. Keep marching forward, setting goals and you'll obtain a personal freedom worth fighting for. Best of luck!
ANY QUESTIONS OR COMMENTS ABOUT THE 52 WEEK CHALLENGE AND SAVING MONEY?
First, best wishes to you for your endeavor to living debt free and becoming financially independent! If you have any tips or suggestions that you feel other readers may benefit from please post them in the comment section below. The more we engage in these conversations the better and smarter we as a whole will be when it comes to saving money.