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How to Become a Super Saver

By U.S. News & World Report

One of the most powerful tools you can use to build wealth is creating an environment of “forced scarcity”. This concept is rooted in the goal of saving for the future first and keeping your monthly household cash flow lean.

This strategy can be an alternative to setting up tedious monthly budgets and can slow down any big spenders in your household. If implemented and funded correctly, it frees you to spend as you see fit, since all your savings goals have been taken care of up front. Here’s how to set up, prioritize and fund a personal forced scarcity plan.

[See: How to Max Out Your 401(k) in 2017.]

Where to Start

Write down your goals. Take time to record your short and long-term goals. The goals might include saving for retirement, education, being debt-free, creating a safety net of cash reserves, travel or even seed money to start a business. This is the stage of the planning process where you can list your stretch goals. If you want to take the entire family to Disney World or retire to a house in the mountains or on a lake, this is the time to lay it out. Dream a little bit about what you would like to be able to do.

Prioritize goals by need. Line up the funding objectives by importance and need. Before funding your long-term goals, such as retirement or college savings, remember to set up a basic emergency fund. Make sure you have a foundation of three to six months of cash reserves.

Save for retirement. Achieving financial independence will be easier if you start saving as soon as possible. Saving a little now can allow you to reap large benefits over time. A young saver has an opportunity to turbo charge his savings because his assets will grow exponentially over several decades. However, if you put off saving until your 50s or 60s it’s much more difficult to accumulate a large retirement account balance because your savings has little time to grow.

[See: How to Save $1 Million by Retirement.]

Debt repayment. It can be helpful to create the goal of having all debt (including mortgage debt) paid off by retirement. Consumer and credit card debt should be paid off as aggressively as possible, especially if you are subject to high interest rates.

Education funding. Your children and grandchildren can get student loans, but there are no loans, grants or scholarships for retirement. Ensure that your retirement finances are on stable ground before loading up 529 college savings accounts or educational savings accounts.

How to Implement

Select an appropriate percentage to save. Your long-term goal might be to save 15 to 25 percent of your gross income for financial independence. This percentage can include your contributions to savings, investing and retirement accounts. But you can start smaller and increase the amount you save over time. For some people it takes time to build the discipline and lifestyle that supports this savings behavior.

Get a 401(k) match. Make sure you are claiming your employer’s matching contributions for your retirement accounts. This can be a good foundation goal for your retirement savings. Plus, if you are not taking advantage of this benefit, you are leaving free money on the table. Many employers provide matching contributions on the first 3 to 6 percent of compensation.

Save more as you get raises. Use pay raises and bonuses as opportunities to expand your savings behavior. If you get a 5 percent pay raise, see if you can increase your annual savings by 2 to 3 percent.

[See: 10 Ways to Repair Your Retirement Finances.]

Appreciate your assets. Learning to appreciate the value of having assets versus the temporary high of buying stuff takes time. After all, there are entire industries set up to help persuade you to part with your hard-earned money. However, with practice and a little bit of success watching your assets grow, you will be hooked. Having money in the bank can help you accomplish goals, give you peace of mind that you will be able to cope with emergencies and allow you to leave behind a legacy that you created. Long-term goals can be fulfilling when accomplished, and saving gives you resources to turn those dreams into reality.

Brian Preston and Bo Hanson are fee-only financial planners who host the podcast, “The Money-Guy Show“.

More from U.S. News

How to Save for Retirement Without a 401(k)

9 Ways to Avoid 401(k) Fees and Penalties

How Long Does it Take to Vest in a 401(k) Plan?

How to Become a Super Saver originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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