The greatest journey begins with a single step. It’s natural and understandable to enjoy life now while you are young. While saving money sounds hard and restricting, here are some simple and effective strategies from bankofamerica.com that will make it easier to get started saving money and will pay mega dividends in the long run.
Get Started Saving Money and Get on Track
Track your expenses and construct a budget based on your findings. Every coffee, newspaper and snack you buy. Once you have finished accumulating this, breakdown the numbers by categories, such as gas, groceries and mortgage, and total each amount. You can also use your credit card or bank statements to help you with this. If you bank online, you can review your statements to break down your spending.
Now that you have an idea of how much you spend on a monthly basis, you can put your expenses into a workable budget. This will give you a picture of how your expenses line up with your income—use this information to help plan your spending and reduce overspending. Be
sure to factor in expenses that occur regularly but not every month, such as car maintenance. (There are some excellent budget forms available on-line or make your own.)
Now it’s time to create a savings category on the budget. Try to save 10–15 percent of your income as savings.
If your expenses are so high that you can’t save that much, it is time to cut back. To do so, identify non-essentials that you can spend less on, such as entertainment and dining out, a vehicle loan or your place of residence.
Make savings a regular expense similar to groceries, is a great way to reinforce good savings habits. You can, and probably should, have more than one savings category.
Short Term Goals Make for Long Term Security
The best way to save money is to set a goal. Start by thinking of what you might want to save for—anything from a down payment for a house to retirement—then figure out how long it might take you to save for it. If you need help figuring out a time frame, try an on-line savings calculator to help you.
Be sure and budget an emergency savings fund as an additional expense.
Here are some examples of short- and long-term goals:
Short-term (1–3 years)
- Emergency fund (3–9 months of living expenses)
- Vacation
- Down payment for a car
Long-term (4+ years)
- Retirement*
- Your child’s education*
- Down payment on a home or a remodeling project
*When saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or a 529 plan. Any investments can come with risks and can lose money, they also create the opportunity for good returns if you plan for an event far in advance.
Remember your long-term goals. Planning for retirement should not be delayed. Prioritizing goals can give you a clear idea of where to start saving. For example, if you know you’re going to need to purchase car soon, you could start putting money away for one.
When saving for short-term goals, it makes sense to use FDIC-insured deposit accounts:
- Regular savings account
- High-yield savings account, which usually has a higher interest rate than a regular savings account
- Money market savings account through a bank, with a variable interest rate that could increase as your savings grow
- A Certificate of Deposit (CD), locks in your money at a specific interest rate for a specific period of time
For long-term goals saving money goals consider:
FDIC-insured individual retirement accounts (IRAs), are tax-efficient savings accounts. Securities such as stocks or mutual funds. These investment options are available through investment accounts with a broker-dealer. Securities, such as stocks and mutual funds, are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank, and are subject to investment risks, including the possible loss of principal investment. Exercise caution in determining a reliable financial planning professional.
Automated transfers between your checking and savings accounts are a simple and efficient means of savings. Banks offer automated transfers between your checking and savings accounts. You choose when, how much and where to transfer money to, or even split your direct deposit between your checking and savings accounts. Automated transfers are a great way to save money. You don’t have to think about it and it generally reduces the temptation to spend the money instead.
Check your accounts every month. This help you stick to your personal savings plan and helps you identify and fix problems quickly. Paying automatically into your savings account is like paying a regular bill.
It is fun to watch the savings grow as you build confidence in your future financial status.
A note from 1800NewRate
The material provided on this website is for informational use only and is not intended for
financial or investment advice.
BankAmerica and MyMoneyCoach have been referenced for this article.
Motors Acceptance Corporation, assumes no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.
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