Control, set your goals, categorize, benefit
Strategies to Take Control of Your Money
- Take control of your money. The power over your money is yours for the taking.
- Figure out where your money goes. Go through some bank statements for a few months to get a complete picture.
- Develop a budget. (You can find some excellent budget templates on-line.)
- Cut out the “fat”. If you overspend on entertainment, groceries, your residence or high interest payments…take control of these. You can do it!
- Determine the amount that you want expensed as “savings” each month and “pay yourself” first.
Pay Yourself First Strategy
One of the best saving strategies is to pay yourself first. This means that you designate a certain amount of your paycheck and you pay that money to yourself before you pay your bills or anyone else. This amount can be maybe 10% of your paycheck. Or, any amount that you decide. The important thing is that you pay yourself first rather than last. Most people pay all of the bills first and then save anything that might be left over. For most people, that method of saving doesn’t really work because nothing is left over to save.
When you pay yourself first, money will be saved because paying yourself is now your first priority. The nice thing about this method is if your budget is a little tight, it forces you to make adjustments elsewhere and your savings continue to grow.
According to moneycoach.com paying yourself first makes sense. Why are you going to work everyday anyway? You go to work to earn money for you and your family. That’s why you should pay yourself first—to make sure that your first priority is taken care of: you. No one else is going to take care of you because they assume that you are taking care of yourself.
Set up an automatic way of doing this so that you don’t even have to think about it. One way is to set up automatic transfers with your bank (either online or at your local branch).
Most people who use this method find that they very quickly get accustomed to living on a little less and soon they don’t miss the amount that they are paying themselves in their savings account. When you almost forget about automatic savings and let them grow, amazing things happen—automatically.
Set your goals and categorize
The big question is how to decide the best savings goals for yourself. Initially, you may want to get started by simply putting your money into one savings account, and then grow your savings from there. Most people have three or so simple categories set up for savings.
Multiple Savings Account Categories
1. An emergency savings account – usually six to nine months of expenses. An emergency savings account is the cash you have set aside in case of an emergency. Ideally, you’re storing this cash in a separate savings account, in order to draw a mental and logistical barrier between this money and your other savings, so you don’t accidentally spend it on a trip or or other non-emergency expense.
This money is specifically for emergency situations, like a medical emergency, a death in the family, or to cover your living expenses should you lose your job and income.You don’t want to liquidate an investment or retirement account at an inopportune time to raise a little money.
Emergency savings aren’t usually measured in terms of dollars — rather, it’s months of living expenses that money could cover. For that reason, everyone will have a different dollar amount, and everyone will have a different need. The most basic emergency fund, for a healthy person without dependents who lives well within their means, is, at least, three months of living expenses.
Two-income families, people with dependents, or individuals with variable or commission-based income might want to think more in terms of having at least six months of living expenses stored in their emergency savings.
It may sound like a lot of money, but amassing your emergency fund is just like saving for a vacation or a new car: Set up a regular auto-deposit from your paycheck into your emergency fund, and let it grow quietly in the background, hopefully never to be needed.
2. Major purchases savings accounts – a down payment on a home, a vehicle, children’s college educations.
3. A retirement savings account – It is smart to start saving for retirement in your 20’s or 30’s, even if you can only sock away a little bit each month. If you plan to retire in your mid-60s your retirement savings may have to last into your 90s given increasing life span projections. And, because savings tend to compound over time, getting a head start can give you a huge advantage down the road.
While preparing for a 30-plus-year retirement will never be easy, the good news is Uncle Sam offers help in the form of tax breaks.
The Benefits of Saving
The benefits of saving are obvious. Disciplined saving for short term and long term goals results in acquiring major purchases, retirement stability, and financial confidence.
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