A Financial Plan – The best way of effective saving
The process starts by taking an impartial look into the entire financial condition that you are in. This can be done by chalking out all what you own and what you owe. This forms the ‘net worth statement’. You have the assets in their current value and the cost of the liabilities. As you subtract the liabilities from your assets, you get a ‘positive’ net worth, if your assets are larger than your liabilities and vice-versa. In order to obtain taxation benefits, it is advisable to participate in an employer-sponsored retirement plan, such as 401(k), 403(b) or 457(b). In these plans money will get deducted from the paycheck.
Each small savings can add up to big differences for your future. Say, each day, you pay $1 for a cup of coffee, a very moderate price for a cup of coffee. This means, you spend $365 a year for a cup of coffee. Now, if you put this amount in a savings account, you get to earn a 5% interest and at the end on 5 years, the amount grows to $465.84, by the end of 30 years it comes to $1577.50. This is called ‘compounding’. So, a small amount can really add up to big money! Similarly, impulse buying can be checked through restraint. And, you might be surprised to find how the spare changes might add up at the end of the month. The high interest debt and credit cards can be paid off to save those dollars.