Sometimes the hardest thing about saving money is just getting started. It can be difficult to figure out simple ways to save money and how to use your savings to pursue your financial goals. The step-by-step guide below can help you develop a realistic savings plan.
The first step in saving money is to know how much you are spending. For one month, keep a record of everything you spend. That means every coffee, every newspaper and every break-time snack you purchase for the entire month. Once you have your data, organize these numbers by category - gas, groceries, mortgage, etc. - and get the total amount for each.
Now that you have a good idea of what you spend in a month, you can build a budget to plan your spending, limit over-spending and make sure that you put money away for a rainy day. Remember to include expenses that happen regularly, but not every month, like car maintenance check-ups. Find more information on creating a budget.
Taking into consideration your monthly expenses and earnings, create a savings category within your budget and try to make it at least 10-15 percent of your net income. If your expenses won't let you save that much, it might be time to cut back. Look for non-essentials that you can spend less on - entertainment, dining out, etc. - before thinking about saving money on essentials such as your vehicle or home.
Setting savings goals makes it much easier to get started. Begin by deciding how long it will take to reach each goal. Some short-term goals (which can usually take one to three years) include:
Long-term savings goals are often several years or even decades away and can include:
Different people have different priorities when it comes to saving money, so it makes sense to decide which savings goals are most important to you. Part of this process is deciding how long you can wait to save up for a goal and how much you want to put away each month to help you reach it. As you do this for all your goals, order them by priority and set money aside accordingly in your monthly budget. Remember that setting priorities means making choices. If you want to focus on saving for retirement, some other goals might have to take a back seat while you make sure you're hitting your top targets.
If you are saving for short-term goals, consider using these FDIC-insured deposits accounts:
For long-term goals consider:
Automatic transfers to your savings account can make saving money much easier. By moving money out of your checking account, you'll be less likely to spend funds that you wanted earmarked for savings. There are many options for setting up transfers. You choose how often you want to transfer money and which accounts you want the money transferred between. You can even split your direct deposit between your checking and savings accounts to contribute to your savings with each pay check. Thinking of saving as a regular expense is a great way to keep on target with your savings goals.
Check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly. With these simple ways to save money, it may even inspire you to save more and hit your goals faster.