Savings or Retirement Plans

Savings and retirement plans are a great way for people to save money. What many people fail to realize is that this should be a part of the budget for any household. This is an investment in your future and as such, is one of the most important bills that you have. Unless you want to be looking for a part time job when you have reached the age of retirement, investing in savings is not only an option but an actual necessity.

We have covered this section in more detail in this book as well. However, many people fail to realize that as an actual expenditure, their financial future or retirement plan needs to be included as an actual part of their budget. It is important that you know what you have to spend money on and where it is being spent for you to be able to properly manage it.

Once again, there are pits and pratfalls which must be looked at carefully before deciding which amounts to include on the budget. Many companies offer programs and benefits packages where the monies invested in the future or retirement of the individual are taken out of the paycheck before the person ever actually receives their money.

In these instances, where the money is taken out before you get your net earnings, the money should not be included in the budget as an expenditure. Remember that the budget is based on your net income and not on your gross. If the money has already been deducted from your salary and the money is not included in your net income, than writing it down as an additional expenditure will convolute your numbers and give you a misleading view of your overall financial situation.

Many companies also offer retirement benefits with “matching plans” where they will match certain contributions by the employee up to a certain amount. Likewise, this should not be listed as part of your net income. This money may be earmarked for your use somewhere in the future but it is not an actual part of your net income for the time being. Listing it as money you already have will make budgeting the actual amount much more difficult.

One general rule of thumb is to save ten percent of your net income or even of your gross income if you can afford it. This is a quick and easy way to expand on your savings and retirement benefits and prepare for the future. If you are able to afford it, by all means, you should include that amount in your budget in order to establish your financial situation firmly and as quickly as possible.

Also to be included here are any other investments you have on the side which will contribute to your retirement benefits or for long or short term savings goals. This can include investments in any of your stock portfolios and even some insurance policies. Each person will have their own individual retirement and savings plans set up in a truly unique and personalized fashion. Anything that contributes directly to one of those plans which is not marked or noted elsewhere on your budget or removed from another portion of your income should be included here in this section of your budget.