You can’t just assume that high-income earners would automatically be saving more. High-income earners often have more financial struggles than those who earn far less and they will need to save more if they want to have money put aside for the expensive retirement years.
Consolidate debt and invest
A little bit of research will show you that a surprising 27% of workers with incomes that are more than the Social Security wage base limit have no retirement savings. As a high earner, you can take out a loan, invest it and allow it to grow.
When it comes to long-term financial goals such as retirement, investing can be a helpful tool. At PersonalMoneyStore, you will find many reputable lenders who can provide you with the funds in less than 24 hours.
It could well be your chance as a high-income earner to consolidate your debt. Maybe money is lean and you just want a jump start to get you pointed in the right direction.
Cost of living
Even high earners battle to keep up with living costs but high-income people can’t succeed if they haven’t got a budget. If a person makes $100 000 a year but uses up most of it on holidays and luxuries, it will be difficult to plan and budget.
Unexpected expenses can arise without warning, such as a medical emergency. Keeping up with the Joneses will drain you of every cent you have and is a real issue with low- and high-income earners and simply means you can’t save.
It doesn’t necessarily matter how much you earn because if you are spending more than you earn, you will eventually have a negative net worth and never be able to save.
Wise saving goals
You should save more when you have a high income as a sudden loss of income can be very scary. Who knows what Covid-19 is going to do, but many have and will lose their jobs as a result of it.
You should always try to have enough money saved to cover your expenses for at least three months. This will at least give you peace of mind but also a bit of breathing space to recover from a loss of income.
Always make sure, though, that the interest earned on your savings is greater than the bank charges. If your bank charges an amount more than the interest you have earned, you need to change accounts.
We all have the same kinds of expenses, whether we are low- or high-income earners. Most of our expenses are ongoing such as rent, food, transport and medicines.
A good goal is to save enough throughout the year so that you can pay cash for your big annual expenses. This can save you the extra cost of buying them on credit and with added interest. Particularly big-ticket items cost a lot more on credit and once you know this, you can take responsibility for your financial status
No need to dip into emergency fund
When you earn more, you need to save more because, as a young person, one of these days, you’re going to need money for a down payment on an apartment or house. If you can save a good part of the purchase price, you can get better interest rates on a home loan.
If you know you’re going to have big expenses, save money as these extra savings can help prevent you from needing to dip into an emergency fund. As you accumulate savings, you’ll be stressing less, more so if you live within your means.
If you have enough saved that you can get by for three months and if you have savings for your retirement, you can have peace of mind.