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Piggy bank considerations for the Year of the Pig

Welcome to the Year of the Pig, the twelfth of the 12-year cycle of animals which appear in the Chinese zodiac related to the Chinese calendar. While this year and sign has many meanings in the Chinese culture, it also conjures thoughts of the ubiquitous piggy bank and how we can save more this and every year, regardless of which calendar we follow.

Year of the Pig money and saving tips_Global News Canada screenshot
Click image to watch full Year of the Pig video from Global News Canada.

More of us could use a bigger, and fuller, piggy bank this 2019's Year of the Pig arrives.

The recent federal government shutdown made it painfully clear that many Americans live paycheck-to-paycheck. A survey a couple of years ago by the employment website CareerBuilder put the number at nearly 80 percent of U.S. workers.

It's hard to break that cycle. But if you're in this tough financial situation and reading this, you're probably willing to try.

And if you do have some discretionary income each pay period, good for you. Chances are you want to put that money to good financial use.

Here are three savings ideas to consider on this Day 1 of the Lunar New Year's Year of the Pig and year-round.

1. Know what you owe.
Being in debt is one reason many folks are unable to save. They are paying what they can to their loans or revolving credit accounts. When it comes to those credit cards and similar accounts, you can't start reducing it until you know what you owe.

Once have those figures in hand, you can develop a plan to pay off these debts. And when the debt is done or at least at a much more manageable level, you then can put the debt and credit payment amounts into savings.

2. Don’t live high on the hog.
It's OK to indulge now and then. A strictly parsimonious lifestyle is no fun. And if you constantly deny yourself, you run the risk of resenting your saving efforts and possibly abandoning them. But don't go to the extreme the other way either. Spending all your spare money or more via credit is no good either. That's how you get into debt (see tip #1).

It's better to find a financial happy medium. The best way to do this is by creating a realistic budget that helps control where your money goes. One place some of it should end up is a savings account for emergencies.

3. Plan for, don't undermine, your future finances.
For many, most savings are in retirement accounts. These include workplace plans like 401(k)s or IRAs.

When time are tough, it's understandably tempting to view your retirement money as a source of quick cash. Or you turn to a credit card to meet pressing current financial needs.

But if you resort to these options, they also will likely push your financial troubles into the future.

Obviously, your debt will increase. That will simply increase the odds that you won't be able to pay it off in a reasonable amount of time. (Again, see #1.)

As for your retirement, how will you pay for your post-work years if you spend the money now?

Plus, while there are ways to take a retirement plan hardship withdrawal, you'll then owe tax on the amount you withdraw and, if you're younger than 59 1/2 and don't qualify for an exception, a 10 percent tax penalty. Before you take this step, check out my post on 5 things to know about workplace retirement plan hardship withdrawals.

Adding to, not taking from, retirement: If you want instead to boost, rather than borrow from, your retirement savings, check out how much you can put into IRA or workplace account.

Wilbur the pig christened terrific by spider Charlotte_Garth Williams drawing
Author E.B. White's pig hero Wilbur was destined for the dinner table until spider Charlotte intervened. You, too, can be terrific, at least when it comes to savings, by taking a few easy financial steps. (Drawing by Garth Williams/HarperCollins)

You can make Roth or traditional IRA contributions for the 2018 tax year through the April filing deadline. That's a potential $5,500.

If you've already maxed out last year's IRA contributions, get started your 2019 amounts. This year, for the first time since 2013, the amount you can contribute has gone up. It's now $6,000.

For older savers, if you're age 50 and older you also can put an additional $1,000 in either types of IRAs for both 2018 and 2019.

As for your workplace retirement plan, the worker contribution limit for 401(k), 403(b), most 457 plans and the federal government's version known as the Thrift Savings Plan (TSP) increases in 2019 to $19,000 from the $18,500 allowed in 2018.

You can find more on this amounts and other retirement plans in my post detailing retirement plan inflation adjustments for 2019.

And if you want more ideas on how to improve your financial and savings situations, check out Melanie Lockert's piece for Student Loan Hero on 31 Quick and Dirty Tips to Get Your Finances in Shape.

Happy Year of the Pig. May it be the best ever for your piggy bank.

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