Simple Savings to Start Saving
Everyone knows how important it is to put money into savings regularly, but research shows that 25% of Americans have no emergency savings at all. Don’t let this be you! If you’re ready to start saving, but you don’t know where to begin, we can help. Here are seven simple steps to start saving and can get you on track to building your nest egg today:
Step 1: Set a goal
It’s always a good idea to work backward when setting up a plan. 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 recreational vehicle or a new phone. Make sure to assign a dollar value for each goal.
It’s important to note that 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 more personal goals before you get started 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 each of your expenses and all streams of income.
As you complete this step, be sure to include seasonal and occasional expenses. Calculate an estimated annual expense amount for these costs and then divide it by 12. Add this value when factoring in your monthly expenses.
At the end of the three months, review your expenses and income 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 you can skip to the next step.
If your expenses are greater than 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 your most significant non-fixed expense, and move from there, cutting costs wherever you can.
You can use the money you trimmed from your expenses for savings.
Step 4: Create a budget
With your newly trimmed expenses, you’re ready to create a monthly budget. Using your list of monthly expenses and income, designate an appropriate amount for each expense. Be sure to include savings in your budget — as if it were an expense.
When working through this step, you can go the old-fashioned route, use pen and paper for a detailed budget, or use a budgeting app, like Mint or YNAB.
Step 5: Choose your savings tools.
With your numbers all worked out, you can move on to choosing a place to park your savings. It may be a good idea to choose a separate location for your long-term and short-term saving goals.
For long-term savings, look for a savings option that offers an attractive interest rate, like a share certificate or an IRA for retirement savings. Keep in mind that you may not be able to open a long-term savings account right away if you don’t have the funds required for your minimum initial deposit.
Short-term savings are better off in an account that allows for easy access and some monthly transactions if needed, like a checking account or money market account at Elevate Credit Union.
Step 6: Make it automatic.
You’ve got your numbers worked out, and if all goes well, your savings should start growing today.
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. Ask us about setting up an automatic transfer from your checking account to your savings account, so you never forget to feed your savings again.
Step 7: Review and adjust as necessary.
Your savings plan is good to go! Remember, the earlier you start, the more interest your funds will accrue.
While you may have automated your savings, that doesn’t mean you can set it and forget it. Be sure to review your budget now and then and check whether you should adjust the amount allocated for savings.
With these simple steps to start saving it can be easy. If you need help getting started, call, text, or stop by today. We can help you choose a savings account that best suits your needs.
