In theory, saving money should be an easy and natural part of a healthy financial plan. How, then, does it become a source of stress in so many of our lives? We all want to reach future financial goals but often lose momentum or get derailed by short-sighted decisions. Fortunately, there is a way to get your fiscal train back on track with just a few simple, realistic savings strategies.
Start Small with Specific Short-Term Savings Goals
With what may seem to be an endless supply of monthly bills, living expenses and other financial obligations, it’s easy to lose focus on the need to tuck away funds for the future. However, one of the best ways to get your mind, and your wallet, moving in a positive direction is to start small and set specific, short-term savings strategies like the following:
- Set a monthly savings goal and stick with it: What do you do with the funds left over after you pay your bills each month? Instead of feeding your spending habits, start by building bridges toward future financial goals by setting specific, realistic monthly savings milestones. If you bring home $3,000 per month, for example, start by setting a modest savings target of around 10%, or $300 a month. As your income increases with future career advancements and promotion opportunities, stick with this 10% monthly contribution and watch your investment reach new heights. If you are a dual-income household, you can get more aggressive, and devote the second income solely (or mostly) to savings goals.
- Establish multiple savings accounts: Work with your financial institution to set up several savings accounts, each devoted to growing funds for a specific goal. For example, one savings account can hold funds for the European vacation you’ve always wanted to take, another could fund this year’s holiday gift-shopping needs, and one could help cover the new tires you’ll need this winter. Divide your 10% monthly savings target up amongst these accounts and inch closer each day to your goals. Be sure to shop around for savings accounts which offer benefits like low or no monthly maintenance fees, high returns on your investment and more. Some other types of savings accounts to establish:
- That significant upcoming event: Your college roommate is getting married next spring. How will you afford the airline tickets, car rental and hotel costs? Setting aside money for an upcoming event like a family reunion, wedding or weekend getaway with friends is a fantastic way to help cover the financial distance between you and your short-term goals.
- A rainy day fund: Another excellent short-term savings goal is to set up a rainy day, or an emergency fund. Not only is it vital to cover the unexpected challenges life throws your way such as a flat tire, root canal or flooded basement, but an emergency fund also gives peace of mind so you don’t have to worry about racking up debt to handle emergencies.
- Take small steps toward big-ticket goals: Not every contribution to your savings accounts needs to target small, short-term goals. Instead, start taking small steps toward large, long-term financial goals such as buying a new car or a putting a down payment on a house.
Remove the Guesswork From Your Savings with Automatic Contributions
One of the best ways to keep yourself focused on saving a significant portion of your monthly income (while avoiding the temptation to redirect money from your savings) is to set up automatic contributions. This essentially puts savings on autopilot. Most financial institutions offer the ability to establish automatic (or scheduled) transfers, at the intervals you desire, from your checking account into one, or several, of your savings accounts. Some employers may even allow you to set up a direct deposit that transfers your paycheck into all of the accounts you designate (for example, 60 percent in your checking account, 25 percent in your emergency fund, 10 percent in your long-term savings fund, and 5 percent in your “play” fund).
Plan to Save a Large Portion of Your Unexpected Cash
In addition to establishing short-term savings goals and setting up automatic transfers to pay yourself first, you should also have a plan in place to save unexpected windfalls of cash you may receive throughout the year. These unexpected funds could come in the form of:
- Bonuses from employers
- Tax refunds
- Rebates on purchases of big-ticket items
- Mortgage escrow refunds
- Gifts from relatives
- Contest winnings
- Inheritances and more
Although spending this new money may sound tempting, a wiser option, and one that will take you a step closer to your financial goals, is to devote a large portion of this money to your savings. With the simple strategies above focused on establishing specific short-term savings goals, setting, and sticking with monthly investment targets, and setting up automatic savings contributions, you can improve your financial health and set yourself on a path toward reaching your economic goals.
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