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'Set up your savings plan to be automatic,' and other top money tips from financial planners

"One of the greatest assets we have in life and personal finance is time."

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In a lot of cases, the best advice for each person will vary, but some money advice can be broadly helpful. From creating a budget to building wealth with compound interest, here is some of the best general money advice, according to certified financial planners.

On budgets: 'The best budget is the one that works for you'

When taking time to create a budget, finding the right format is important. "A good budget is simple and helps you save consistently," says Jessica Goedtel, a CFP and founder of Pavilion Financial Planning. "The best budget is the one that works for you, so don't be afraid to try different methods." 

A budget framework such as the 50/30/20 rule splits your paycheck into three main categories: needs, wants, and savings. Then there's the reverse budgeting method, which has users first set aside money for fixed, important expenses including rent, bills, and transportation, as well as priorities like retirement.

Reverse budgeting allows you to choose what to do with leftover money, says Nadine Marie Burns, a CFP and president and CEO of A New Path Financial. "If anything is left, can you put it [towards] extra debt payments or save a bit more?"

On saving: 'Always save some money for a rainy day'

"Be prepared," says Linda J. Farinola, a CFP and president of PFG — Financial Planning & Management. "Always save some money for a rainy day or for your future. Those days will come."

The Covid-19 pandemic is a recent example of the need for emergency funds. During that economic turmoil, nearly half of people have run out of emergency savings, according to a survey from research firm Highland. If they were faced with a surprise $500 expense, 82% of respondents said they would not be able to afford it.

Financial advisors generally recommended putting at least 3 to 6 months' worth of living expenses toward an emergency account. Financial expert Suze Orman previously told Grow that the pandemic has shown aiming to save a year's worth could be even smarter.

To make it easier, "set up your savings plan to be automatic," says Laurie Nardone, a CFP and managing principal at Shira Ridge Wealth Management. Most employers allow for automatic direct deposit into multiple accounts, so you could split your take-home pay into different checking or savings accounts.

On investing: 'The power of compounding interest can make a huge difference'

Thanks to the power of compounding growth, the earlier you start saving and investing, the better. With compounding, you earn interest on your interest as well as your contributions.

"Possibly the best advice for someone to start managing their money is to start now. One of the greatest assets we have in life and personal finance is time," says Sergio G. Garcia, a CFP at BFS Advisory Group.

classic example from the Federal Reserve Bank of St. Louis shows the power of compounding. The saver who starts earlier ends up with a bigger savings balance at age 65, even though her later-starting friend ultimately contributes three times as much. The extra decade of compounding growth put her ahead. Remember, though, investing involves risk and examples like these do not take into account the fact that markets can go up as well as down and that can affect the value of your investments.

If you can't start early, start now, says Arthur J.W. Ebersole, CFP and founder and CEO of Ebersole Financial. "Getting into the habit sooner rather than later will pay dividends over the longer term." This is because the dollars you invest initially have more time to grow until retirement.

"The power of compounding interest can make a huge difference in a financial plan," adds Zachary Bachner, CFP and investment advisor representative at Summit Financial Consulting. "If you wait one year to start investing, you actually lose your last year's growth."

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