Everyone knows you’re supposed to save money. After all, if you’re ever going to retire, you need to have some funds set aside! But you can’t achieve financial independence (the ability to pay your living expenses for the rest of your life without having to be employed or dependent on others) just by saving your money.

So stop just saving your money. Save with a purpose, grow your assets and automate your finances to set yourself up for financial independence. With 36% of Americans believing they will never have enough money to retire, you want to ensure you have focused plans for each dollar to put those dollars to work for you.

Save with a purpose

While saving shouldn’t be your only strategy for financial independence, it is still crucial to get it right. My advice: Have a little more in savings than you are comfortable with. Rainy days are going to happen, and when they do, it makes such a difference to your peace of mind and financial health to have three to six months of expenses set aside. 

For example, my son recently required unexpected surgery. Fortunately, we had an emergency fund to pull from to cover the costs. We have since pumped the brakes on other savings in order to replenish the fund.

But how do you get that emergency fund? Many experts recommend saving at least 20% of each paycheck, and if you can swing that, great. But if saving 20% isn’t feasible with your current income, choose an amount that makes sense, set a budget and go from there. The key is to be consistent and keep working toward your goal.

Grow your assets

Once you have settled on a good savings strategy, growing your assets is an excellent next step. Your mantra here should be “Give every dollar a purpose.”

For example, let’s say you have paid your bills and fully funded an emergency fund. Don’t let your 20% savings sit idly in your checking account! Put it to work for you by investing in the stock market. A well-diversified portfolio can give you confidence in achieving long-term growth that historically has outpaced inflation.

Now, investing strategies depend on individual goals. Questions to consider include these: Are your goals long term or short term? How much do you already have saved for retirement? What’s your comfort level with risk? When do you want to access your money? 

It may be worth sitting down with an investment advisor to talk about your goals and options. They’ll help you decide if taking advantage of a 401(k), IRA, or short-term regular investment account is the best option for you.

Automate your finances

Setting up an automated system for your finances can make a world of difference. As humans, we make thousands of decisions every day. And the more decisions we make, the harder it is to make good decisions. This concept is known as decision fatigue.

With money as such an integral aspect of our lives, decision fatigue can have a significant negative impact on our finances. If you are like me, spending money today can be far easier than saving for my financial future. As we help our clients implement money management systems and automate their finances, this takes away the need to make decisions every time a paycheck comes in. Here’s how the process typically works:

1. Set bills up on autopay.
2. Decide how much you are comfortable with in your bank accounts and replenish any deficit with your paycheck.
3. Invest for the future via automatic contributions to your investment accounts. As previously noted, you should strive to invest at least 20% of your income.
4. Additional money goes into “buckets,” which could include funds for fun activities, a house remodeling project five years down the road, etc.

This system simplifies everything: You save off the top and pay your bills without having to think about it, making financial success much more likely for you.

To reach the important goal of financial independence, you must save with a purpose, grow your assets and automate your finances to help you stay on a good path. With a focused plan and even personalized advice from a financial advisor, it will be much more likely for you to achieve the comfortable retirement you dream of. 

Scott Peck is a financial advisor at Merrill Financial Associates, which offers fee-only, fiduciary investment management and is located in Provo, Utah. This article is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any investment product. Merrill Financial Associates is located at 3549 N. University Avenue, Suite 175, Provo, UT 84604, and can be reached at 801.356.7100. Advisory services are offered through Commonwealth Financial Network®, a registered investment advisor. 

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