On March 5, 2015

Pay yourself first: an approach to long-term savings

By David E. Raven

Most of us have heard the phrase “pay yourself first” at one time or another when referring to personal savings plans. The idea is simple, designate a portion of your weekly paycheck to automatically go into your personal savings account, just as you would pay your mortgage, car loan, or child’s college savings fund.

For some of us, this philosophy conflicts with our sense of fiscal responsibility, and we feel compelled to pay everything else except ourselves. Often it is out of a sense of concern and responsibility for others. Unfortunately, this mindset causes many people to lose focus on the importance of their own savings for the future. In fact, according to an annual survey assessing household savings, only about one-third of Americans feel prepared for their long-term financial future.

While it is important that you meet your financial responsibilities, it doesn’t have to be an “either-or” proposition. In fact, by making sure you save for yourself, you’ll actually be helping others in the long run.

February 23-28 was America Saves Week, a national focus on the promotion of good savings behavior, and a chance for individuals to assess their own savings status. National and statewide organizations—including colleges and universities, banks, businesses, non-profits and government agencies—all support the effort help consumers get focused on savings.

Whether you have been a long-time saver or are taking that first step, it’s easier than you think to begin saving. You can automatically have part of your paycheck deposited directly into your savings account, and if it is an Independent Retirement Account or similar account, it may even reduce your withholding taxes. You can also transfer money from your checking to savings each month, or save a portion of your annual tax refund. Once you take the first step, it really does become easy.

The America Saves website (www.americasavesweek.org) offers lots of tips on how to save for your future. Consumers can even receive monthly emails and personal goal-specific text messages from America Saves with savings tips and advice. The site can also help you identify a savings goal, even for an emergency fund, an amount to save per month, and the number of months it will take to save that amount.

Individuals with a plan are far more likely to save than those without a plan.

By focusing on your own financial security, you are doing several things. First, you are providing for your own future comfort, which will make it easier on you and those around you. Second, you’re modeling good habits for your children and grandchildren, who will help secure the financial success of the future if they start to save now. And finally, you help build the financial strength of our country, and citizens that are more independent and self-directed.

David E. Raven is NBT Bank president of retail banking

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