When it comes to money Erica Leresche, 27, says she has a "no excuses mindset." Over the last three years she has saved $30,000 — all while making around $50,000 working at the Oregon State Credit Union in Albany, Oregon.
Leresche is part of a 2021 Principal Financial Services survey of so-called "supersavers" who were able to max out their annual retirement contributions or come close to it, or sock away at least 15% of their salary. Leresche fits the bill on both counts: She currently contributes more than 20% of her income to her 401(k), and is "on track" to max out her 401(k) this year. For 2021, the 401(k) contribution limit is $19,500.
Leresche attributes her financial priorities to her upbringing. Her family, in general, experienced some financial instability, including a time when they had no place to live. "When I was younger, around 3 years old, my parents moved to an area without a job, and we were homeless for about eight months."
She has also watched both of her parents struggle, as they "don't have any kind of retirement savings."
And the last year, she says, taught her how unpredictable life can be. "My mom recently had Covid and she was in the hospital sedated for over a month and her hospital bills are probably over half a million dollars. You can't really predict what's going to happen."
All of this, she says, informs her spending and saving habits. "I try to continually cut budget areas in order to challenge myself," Leresche says.
Here are four tips for setting yourself up for financial stability, according to Leresche and financial experts.
Leresche imposes a tax on herself: Whatever her credit card balance is at the end of the month, she pays that off and then puts an amount equivalent to 10% of that into savings. For example, if her credit card statement was $300, she would pay that off plus put $30 in her savings.
"It kind of works as a double-edged sword in a good way," she says. "It helps increase my savings and decrease spending because I don't want to have to pay extra at the end of the month."
When looking for ways to reduce expenses, don't deprive yourself of things that are important to you. Instead, find an area of your budget that is tied less to your happiness and work to cut that.
"I really love Starbucks coffee, so I will buy a coffee in the morning, but I'll pack my lunch because usually lunch is more than $5," Leresche says.
Video by Jason Armesto
If you're not sure what you can cut back on, make a record of every transaction you make, says Mark La Spisa, a certified financial planner and president of Vermillion Financial. "I usually start with asking the individual to write down all of their poor spending habits, followed by all of their spending goals," he says. "Then I ask them which poor spending habit do they feel is most important to address first and which one do they feel they can accomplish over the next 30 days."
When you get a promotion or raise, you might want to start spending more, too. This is called "lifestyle creep" and can end up offsetting any additional money you're earning.
Leresche has worked at Oregon State Credit Union for six years and during that time, her income has significantly increased, she says. However, she hasn't let that affect how much she spends. "My hourly income has more than doubled," she says. "I've never stopped spending that initial amount. Every year I get a raise or promotion I'll just automatically allocate that money to savings."
Automation is key, says Sri Reddy, a chartered financial analyst and senior vice president of retirement and income solutions at Principal. "If your employer offers direct deposit, have a portion of your paycheck go to your savings [rather] than to your bank account," he says. "Save things before you even see the paycheck and then you won't even miss it.
If your company matches your 401(k) contributions, this is extra important, Reddy says: "Make sure you're not leaving free money on the table."
There are lots of expectations that others might put on you, Leresche says, but it's important to decide what you want in the long term and how you will afford it.
"I made the decision that I'm OK with not having kids and I view them as more of an expense," she says. "I, personally, don't have to have them and I found a partner who doesn't want to have them and it's allowed me great flexibility."
When picking her college major she also opted for a career path that paid well over one that she was passionate about: "I love horticulture and biology, but banking pays great."
Whatever you do, she says, don't let anyone else's priorities supersede your own. "Prioritize and decide what you want and solely what you want," Leresche says. "In the end, it's just you."