Savings Calculator

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Savings Calculator

Saving Breakdown

I always say the difference between someone who lives paycheck to paycheck and someone with a savings, is the interest they are paying and the discipline they have learned in spending.  Learning to build a savings is how people make it through the “emergencies” in life without over-drafting and further damaging their credit.  Budgeting plays a huge part but so does knowing how to leverage what you have to get what you want.  Having excellent credit often means you pay next to nothing for the things you finance.  The hundreds of dollars saved for most people with excellent credit allows them to take advantage of the “deals” out there  creating further savings.  It also allows them to have money in investments that grow rather than drain your accounts.

One of the fastest ways to get out of debt is to use the “snowball effect”.  Since most people’s debt is high credit card balances, this can help you to know how and where to put your money to have the greatest impact.  Credit cards create monthly payments that only apply 1% of your balance to be paid off if you are only making the minimum payments.  Most people can afford to pay more than their minimum payments but try to spread it across all of their accounts.  If you just pay your minimum payments on all of your cards and take any extra amount of money you can apply starting with the smallest card, you will find that that card gets paid off pretty quickly as all of the extra money is going towards the principal balance.  Once the first card is paid off, not only do you have the extra money you were paying, but you also have the minimum amount that you are no longer paying on the paid off card.  

You apply the amount of the minimum payment plus the extra amount to the next card and more money is being applied towards the principal balance.  This means you will be able to pay this card down faster than you could have before.  Before you know it, you will be on the last card, and you will have a lot more money to apply and then you are out of debt.  Plus, the more disciplined you become, typically the more money you can find to dedicate towards becoming debt free.  

As you pay down high balances on  your credit cards, your utilization will drop and this improves your credit scores.  This also opens opportunities to get lower interest rate personal loans to pay off all your debt and have one monthly payment designed to be paid off over a 3-5 year period.  You also have the opportunity to look at refinancing higher interest rate loans such as car loans to free up more money monthly to work on your debt or rebuild your savings accounts.  Always start with a goal each month of savings.  Start small and increase that goal each month.  Make sure you try not to ever spend that money unless it is an emergency and if you do, make sure to focus on getting back to that goal and keep it rising.  Once you have $5000 in the bank or more, you will find that it keeps growing from there and most “emergencies” can be managed easily.  Or, you find that you have a down-payment on a home or other investment that further accumulates your wealth. 

In the years I have managed employees, I also noticed that convenience is a quick way to drain your savings accounts.  I would have high paid employees live paycheck to paycheck always stressing to me their financial struggles.  What I also noticed was that most of these same people would come to work with a Starbucks or a Red Bull, and snacks.  I would ask them if they stopped each day on the way to work and almost always, they did.  Changing behaviors such as buying a nice espresso maker and making coffee before they came to work or buying in bulk at Sam’s Club or Costco, allowed them to still enjoy their “luxuries” but would save them an incredible amount of money over time.  I saw many people go from financially struggling to have savings to having more money when they needed it and less financial stress.

Once you start realizing where all the bleeding is happening and stop the bleeding, you have money left over each month to put into investments that can make you money over time to ensure you never have to live paycheck to paycheck again.  Make sure to check out the auto and mortgage calculators to see how much money you are overpaying on your car or home.

Get in touch! We look forward helping you reach your goals.