We all know how important it is to start saving your money, but we have an incredibly hard time putting that plan into action. For many, the hardest part is getting started. Once you have a good game plan to save, it will allow you to reach your financial goals. Here’s some of our favorite saving tips.
1. Record Your Savings
While we’re all aware that we’re spending money, most don’t have a good concept of how much is spent and on what purchases. That’s why our first step is to figure out where your money is going. Keep track of all your purchases by keeping a spending diary. Every time you buy something, write it down in here. Once you’ve done this for a month, divide the purchases into categories. To name a few, which are for work, which are groceries, and which are for the mortgage?
Just as a good coach prepares his team for a game, the same goes for saving. You must go in with a game plan, or in this case what we like to call a budget. Your budget outlines your expenses with your income so you can get a better understanding of your cash flow. Make sure you’re living within your means and your income outweighs your expenses. We call this a balanced budget.
Don’t just save money if you find yourself with some extra cash laying around. Actually plan to save money and allocate a portion of your monthly budget to savings. We suggest you put away between 10-15 percent of your income for this. If you can’t afford to do this, take a look at your budget. Are you spending too much in areas you could cut down on like entertainment and eating out?
4. Set A Goal
While some might have the discipline to put money aside each month, others can find it quite difficult. Having a goal you can save towards makes the experience easier to grasp for many. Define what you’re saving for in the first place? Is it a new car, a mortgage, vacation, or something else. Based off your goal, determine how long it will take to get there. Having a concrete goal in mind provides people with motivation to put that extra money away each month.
5. Tools For Saving
Just as building a house requires tools, so does saving money. There are many saving tools out there that can make your life a lot easier. Examples of these include a savings accounts like certificates of deposit for short term goals. A good tool for long term goals, like retirement, would be a 401(k).
6. Watch Your Growth
Now’s the fun part. If you’re able to follow these different tips, you’ll be putting money away in no time. Keep track of your finances by watching your savings grow month by month. If it staggers look into it and identify the problem. If you can begin saving, especially when young, you can leverage your money to make it work for you. Have you ever heard of compound interest?