Having savings is an essential part of your financial life. Your savings will help you when you retire, have a medical emergency, lose your job, or cover any other unexpected expenses. Here’s how you can begin making a savings plan and secure your future financially.
Take stock of your finances
The first thing you’ll need to do is get a clear idea of your current financial situation. You can start doing this by going through your bank statements for the last few months. _combing through your statement will help you determine how much money you can save. For instance, if you typically spend a big part or all of your paycheck before your next payday, you won’t be able to put away a large amount every month. So, thinking that you’ll be able to start saving around $1,000 each month is not realistic in this scenario.
Instead, you should seek out ways to ensure you can deposit a smaller amount, such as $50 per month, toward your savings account. Small steps like this are important when building a savings plan as they make it easier for you to adhere to it. And when you abide by the plan, you create a series of wins for yourself that you can build on.
Reduce your spending
Once you’ve already started taking small steps, you may also be able to discover more savings by finding ways to reduce your spending. Remember that just because you are starting to save money it doesn’t necessarily mean that you have to give up your daily coffee runs or even the occasional dining out at your favorite restaurant. But if you are used to ordering lunches from restaurants while you are at work, you can introduce small changes and start packing a lunch from home 2 times a week, to begin with.
What if your budget is too tight and you can’t see any room to save? This sure is a sticky situation, but not one you can’t get out of. What you can do in this situation is try to find ways to increase your income. You can go about doing this by getting a side hustle or looking for another job with higher pay. Although it’s not always easy to earn extra money quickly, employing these strategies may help you get some breathing room in your budget.
Forgetting to deposit your contributions is not an acceptable reason for your savings being less significant. Thankfully, you can now easily set up standing instructions with your account to transfer your planned contribution to your savings account automatically. Automating your savings means that you don’t miss a single contribution and your savings will keep growing without you having to do anything.
It’s best to schedule your automatic payments around your payday. This way, you can avoid overdrawing from your account as the deductions happen automatically when you have money in your account.
Maximize yield on every dollar
If you are putting away a little money every month, you have to make sure you’re getting the most out of every dollar. But be aware, the average savings account gives you only 0.06% APY. Consider exploring high-yield savings accounts instead as they pay more. These are often available with online banks. As online banks don’t need to pay for real estate, they tend to give customers higher rates because of low costs.
The interest that you earn on your savings will continue to earn you more interest as time passes, plus you’ll always have your initial deposit. This compounding of interest will increase your balance much faster.
Keep your goal in mind
After putting away a big chunk of your money, you might be tempted to use it from time to time. It’s important to review whether the expense you’re using it for is essential or not. If the expense keeps you from your goal and is not an emergency or big need, it’s better to not give in to that temptation.