Hey everybody! Welcome back to the Momming on a Budget blog! Although saving money is hard, it is necessary if you want to reach your financial goals. When I was younger, I had trouble saving. But, I was really focused on being financially stable, so instead of saving I just paid my bills in advance. I would pay my rent three to four months early because I did not have the self-control to save $3,000 in the bank. Realizing the strategies that work best for you are essential to successfully reach your savings goals. I have put together a list of five tips to help you get started on your journey and to create a plan of action to start saving today!
ONE) Determine your saving style. What methods have you used in the past to save money? Did those methods work? Were you able to meet the goal(s) you set? Were you frequently using the money because you had easy access or because you gave yourself excuses as to why you "needed" it? When it comes to choosing a saving strategy, "if it ain't broke, don't fix it." If it is broke, you probably are too. There are literally hundreds of ways to save your money, but to keep things simple I have created three basic categories.
Cold Hard Cash: Some people like the traditional, old-school method of saving in cash (I'm one of those people). This typically consists of money being taken out of every paycheck, I like to do this after I pay all my bills online. You then take those funds and store them in a home safe or some other hidden location. This method is great for people with self-control and who aren't in a rush to meet their savings goals. There are two downfalls to taking this approach. There isn't much security or insurance for your money if it is stolen or destroyed in a disaster (i.e. fire). The second downfall is that the money is not growing and working for you as it would with other options.
Savings Accounts: This option is great for people who need their funds out of reach, though easily accessible if required. Start with exploring the best saving options offered by your current bank. This is a great idea to start allowing your money to make money. The increase on your funds will be subtle and barely noticeable when your account value is low, but something is better than nothing right? I enjoy the ease of this saving option. When you have a new deposit, you can go online and automatically move the money to your savings account. Do your research when taking this option to ensure you are getting the best interest rate. A few of the top rates I recently saw online were Marcus by Goldman Sachs, offering 1.95% APY and HSBC Direct with an introductory rate of 2.01% APY. Make sure to read the fine print regarding minimum balances and withdrawal rules before making a selection. There are even apps that can make automatic saving decisions for you, to simplify the saving process, such as Chime, Digit and Qapital.
Long-Term Investments: Most people don't think of investment options as saving options, I do. Long term investments can be used as secure saving options. There are many safe investments that can be classified here but I will only highlight the one I am familiar with, CD's. They guarantee a profit but you typically lose access to your money for a period of time ranging from 2 to 10 years. These rates are typically higher than standard savings accounts. I recently did some research for the rates of a $5,000 investment for 3 years and the rates ranged from 1.2% to 2.85%. If you want to do some research over your own, check out Bankrate for current rates, it offers some great information on CD's pros and cons: Bank Rate CD Calculator.
TWO) Set your goals. What are you saving for? Are you developing an emergency fund, preparing to make a large purchase, or working towards a set amount? The goal will help you determine the best strategy and benchmarks. Do you have a deadline for this goal? Is there any way that you can reach your goal faster? Saving is a task that required a ton of dedication and diligence. In order for you to reach your savings goal, you must have strong goals that keep you encouraged to keep going. Here are a few tips to help you stay on route during this journey.
Choose a method of how you will list and track your goal progress. Getting your goals out of your head and onto paper (or a spreadsheet) is the hardest part. Though this is the most important part of the journey to achieving your saving goals. Writing down your goals make them tangible.
Once you determine how you will list and track your goals, give yourself a due date for each and every goal on the list. Due dates keep you focused and also give you the ability to breakdown your goals into feasible chunks. For example, if you want to save $10,000 next year, you can break that into smaller goals such as $5,000 by July, with an even smaller goal of $385 bi-weekly.
Give yourself both short-term and long-term goals. Having separate and smaller goals will keep you motivated as you check on your goal list. For example, if your goal is to save $500 and pay off your debts, split that into smaller goals. How much are your debts total? List the order that you will pay them off, start with the smallest debt with the highest interest rate. Every credit card, personal loan, student loan, stands as an individual goal and with hard work you will quickly see the results.
THREE) Review your budget. Determine how much you realistically can save. There are two steps to help you figure out this number, prioritize expenses and then manage disbursement of remaining funding appropriately to meet your financial and life satisfaction goals.