Simple Steps to Start Saving
Simple Steps to Start Saving
It's common knowledge that regularly saving money is crucial. If you're prepared to start your savings journey, follow these seven straightforward steps.
Step 1: Set a goal
Working backward when setting up a plan is always a good idea. Take a few minutes to think over your long-term and short-term savings goals. These can include saving for retirement, a dream vacation, or covering a large purchase like a home. Make sure to assign a dollar value for each goal.
When you start putting money into savings regularly, it's best to start with building an emergency fund that includes three to six months' worth of living expenses before moving on to other saving goals. Outlining your goals before you start will help motivate you on your journey toward saving.
Step 2: Start tracking your expenses and income
Determine precisely how much money you need to get through each month. For three months, keep a paper or digital record of your expenses and all income streams.
As you complete this step, include seasonal and occasional expenses. Calculate an estimated annual expense amount for these costs and divide it by 12. Add this value when factoring in your monthly expenses. Review your expenses and income at the end of the three-month period to see how much money you require to live on each month.
Step 3: Trim your expenses
If you find that your income exceeds your expenses by a generous amount, you're in a good place and can skip to the next step. If your expenses exceed your income or the numbers are too close for comfort, it's time to scale back. Look for ways to trim your expenses without feeling the pinch. Start with the largest non-fixed expense and move from there, cutting costs wherever you can.
Step 4: Create a budget
You're ready to create a monthly budget with your newly trimmed expenses. Designate an appropriate amount for each monthly expense using your list of monthly expenses and income. Be sure to include savings in your budget — as if it were an expense.
Step 5: Choose your savings tools
With your numbers all worked out, you can move on to choosing a place for your savings accounts.
For long-term savings, look for a savings option that offers an attractive interest rate, like a CD or an IRA for retirement savings. Remember that you can only open a long-term savings account after you have the funds required for your minimum initial deposit.
For short-term savings, it's beneficial to have the money in an account that offers convenient accessibility and allows for occasional monthly transactions, such as a savings or money marketing account.
Step 6: Make it automatic
You've got your numbers worked out, and if all goes well, your savings should start growing. Unfortunately, though, impulses can sometimes get in the way of our best intentions, holding us back from reaching our goals. Keep this from happening to your savings by making them automatic.
If you currently have a savings account or want to open one up, we can help set up automatic transfers from your checking account to your savings account.
Step 7: Review and adjust as necessary
While you may have automated your savings, that doesn’t mean you can set it and forget it. Be sure to review your budget occasionally and check whether you should adjust the amount allocated for savings.
Contact us today if you need help getting started with a savings account. We can help you choose a savings account that best suits your needs.