Author of 12 personal finance books shares top tips for saving success

  • Author Jean Chatzky shares important steps anyone can take to build financial security.
  • There are several tools that help savers create a budget and track their spending.
  • Maintaining a budget and building up savings will help people build a better relationship with money.

While each person’s roadmap to a financially free and clear future looks different, there are some key themes that will benefit anyone on the path to financial freedom. And one expert, Jean Chatzky, CEO of HerMoney Media and host of the “HerMoney” podcast, spoke with Insider about some of the larger themes that will help guide people from all financial backgrounds to success.

The goal, Chatzkzy explains, is to provide the latest information on budgeting and financial planning to improve our relationship with money over time. It changes our behavior and the relationship we have with money and – what it means for our present and our future – it can act as a catalyst for setting bigger, concrete goals for financial independence, whether it’s whether it’s paying off big debts like student loans or medical bills. , looking for a future with a better quality of life or early retirement.

There are certain monetary fundamentals that, if followed, will lay the groundwork — and even guardrails — for building financial stability, Chatzky says, and explains four of the most crucial themes for financial freedom.

There’s a reason a comprehensive budget is the first step to a financial plan.

Getting your finances in order doesn’t have to be a daunting task, Chatzky says, but it’s a necessary first step. Planning and budgeting helps savers track spending, prepare for emergencies, get out of debt, and track their financial progress. These latter themes are not all necessarily co-dependent, but a comprehensive budget is the essential cornerstone to prevent any backsliding on the path to financial freedom.

The only way to create a budget that works is to know how you spend your money and track what your money does for you.

“Knowing where your money is going is the only way to build a realistic financial life,” Chatzky says. “When you create a budget and know where your money is going and channel the right amount of money into savings, you actually have more freedom to decide what to do with the rest,” Chatzky says.

Tracking a budget can be done with a mobile app such as Mint.com, while some major banks also offer budget tracking tools through their online banking services.

While making a budget and sticking to it may seem restrictive and limiting to some, Chatzky says it’s what ultimately allows for more freedom. Take a moment and sit down with all your bills, expenses and income, Chatzky adds, and be honest with yourself about how you spend your money, maybe create a spreadsheet with all your monthly expenses and do a plan to reduce unnecessary expenses. – the late afternoon coffee run, streaming services, delivery from Doordash or Grubhub – and save a certain amount of money each month.

When setting a budget, first think about what is important. Major expenses such as housing, groceries, insurance, credit card payments are likely to be the biggest for most people. After that, savers should have a fixed amount that they save each week or month and should be as consistent as your housing payment, even if it’s just a small percentage of your take home pay. .

Some apps, such as Acorns, Chime, and Digit, help savers round up their daily purchases to the next dollar and then deposit those small amounts into a separate savings account. Anyone on a salary knows where their money comes from, but it’s just as important to know where your money goes.

“It’s so easy to pay for everything now and spend the money. I make it easy for myself and just check my account online every day – that way I know what’s coming out and there’s no surprises,” Chatzky said.

Make deleveraging a top priority.

Going into debt month to month and year to year will make it difficult to save.

“Debt stress is the number one thing that makes us unhappy with money,” Chatzky says.

Those with good credit have a few options for consolidating their debt, whether through credit card balance transfers with promotional introductory rates, personal loans, or using a home equity line of credit. .

“Debt repayment is more important now because of high interest rates and if interest rates go up again, it just makes debt more expensive,” Chatzky said.

Now is the time to really make an effort to pay off your debts, because saving money is even more of a priority. It may take some time, but with discipline and determination, it will be worth it. And once you’re debt-free, you can save that money and continue to build a strong financial foundation for yourself.

There are many ways to pay off a debt, but the snowball method is to first pay off the smallest amount of debt and then apply the amount of the paid off debt to the next debt due. This process will continue until all accounts are paid. By using this method, you become intentional about paying off your debt and as each bill is paid, it gives you a sense of control over the debt.

Make sure you get the match from the employer.

If and where possible, invest in a work-based pension plan and make sure you have enough money to get the employer match, as it is essentially free money for the employer. employee. According to the Bureau of Labor Statistics, 68% of workers in the private sector had access to retirement plans in 2021, which means the majority of working adults receive some sort of retirement benefit as part of their job. It’s one of the best ways to start saving and investing.

“The best thing about the 401(k) is that it’s automatic and you can set it and forget it,” Chatzky says.

Employer matching can significantly boost your long-term retirement savings, although anyone with a 401(k) benefit should check their employer’s vesting schedule (vesting schedule is years of service required before an employee can retain any funds matched by the employer).

Having an emergency fund will actually save you from going into debt.

On the path to financial security, it is important to build up a large cash emergency fund. An emergency fund will protect your financial stability in the event of the unexpected. Make it easy for yourself and set up automatic deductions from your paycheck to a savings account each payday. A good goal is to have enough savings to cover 6-9 months of expenses in the event of job loss or other major calamity.

A YouGov survey for the Economic Security Project reported that 49% of Americans would not have $400 to cover an emergency expense.

“An emergency fund is insurance against credit card debt. If the transmission goes out, or the water heater breaks down, or there’s an unexpected medical bill, you’ll be able to use the money your emergency fund to cover it instead of using a credit card or getting a high-interest loan,” Chatzy says.

This is also why a budget is so important because when you know where you are spending your money, you will see where you can cut expenses to build up your emergency fund.

Adjust your money mentality.

Do you feel tension or anxiety around money? Have you taken the time to understand your feelings about money? Chatzky encourages having a healthy mindset around money, which certainly seems easier said than done. Financial behavior, that is, the way you manage your money, can be defined from childhood. It is our own personal feelings about wealth and the psychology of being in debt versus being financially free that will inform how one manages one’s money.

“People approach money based on their own biases, experiences, and fears, which affects how they handle money. For example, if you grew up with money anxiety or have l Feeling like there’s never enough money, that could impact how you handle money today as an adult,” Chatzy told Insider.

It is often these pre-existing feelings around money that lead many to think that money is in control, when it is not. John wants people to own their money.

“Owning your money means owning your life, if you feel like you’re always behind or in debt, it’s hard to feel in control,” Chatzky says. “But if you can make a plan, know where your money is going and have an emergency fund, then it’s a much more powerful place in terms of money and financial stability.”