You hear it everywhere you turn around. Save money, cut costs, save a nest egg for the future. Saving is very important for your future. In a previous mytake I discussed about having a bank account. In this mytake I will share some tips on how to save money for a emergency or a rainy day.
1. Record your expenses
The first step in saving money is to know how much you’re spending. For one month, keep a record of everything you spend. That means every coffee, every newspaper and every snack you purchase for the entire month. Once you have your data, organize these numbers by category—for example: gas, groceries, mortgage and so on—and get the total amount for each.
2. Make a budget
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 in an emergency savings fund. Remember to include expenses that happen regularly, but not every month, like car maintenance check-ups.
3. Plan on saving money
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—for example: entertainment and dining out—before thinking about saving money on essentials such as your vehicle or home.
4. Set savings goals
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 1-3 years) include:
Starting an emergency fund to cover 6 months to a year of living expenses (in case of job loss or other emergencies)
Saving money for a vacation
Saving to buy a new car
Saving to pay taxes (if they are not already deducted by your employer)
Long-term savings goals are often several years or even decades away and can include:
Saving for retirement (I will talk about 401K and IRAs later)
Putting money away for your child's college education
Saving for a down payment on a house or to remodel your current home
5. Decide on your priorities
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.
6. Different savings and investment strategies for different goals
If you're saving for short-term goals, consider using these FDIC-insured deposits accounts:
A regular savings account, which is easily accessible
A high-yield savings account, which often has a higher interest rate than a standard savings account
A bank money market savings account, which has a variable interest rate that could increase as your savings grow
A CD (certificate of deposit), which locks in your money at a specific interest rate for a specific period of time
For long-term goals consider:
FDIC-insured IRAs, which are built for purposes such as retirement savings.
Securities, like stocks and mutual funds. These investment products are available through investment accounts with a broker-dealer (e.g. Merrill Edge,Edward Jones,Charles Schwab,Wells Fargo Advisors).
Remember that securities, such as stocks and mutual funds, are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank, and are subject to investment risks including the possible loss of principal invested.
7. Make saving money easier with automatic transfers
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 money you wanted to use for savings. There are many options for setting up transfers. You choose how often you want to transfer money and which accounts you want to use for the transfers. You can even split your direct deposit between your checking and savings accounts to contribute to your savings with each paycheck. Thinking of saving as a regular expense is a great way to keep on target with your savings goals.
8. Watch your savings grow
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.
More on 401ks:
Chances are if you're employed your employer offers a retirement plan you can put money in to set aside for retirement. This is called a 401K. A 401k usually works that every paycheck a determined percentage or dollar amount you set will be taken out to fund the account. Most employers offer matching of the funds to help build up your account. My employer offers 30% matching. I personally invest $5 every paycheck to start off with as I am new to it myself. The longer you stay with the company the more your money will vest.Most places the money will not vest 100% till three years. 401Ks typically are able to be drawn out at age 60. They can be withdrawn or.borrowed against earlier but at a higher tax and penalty rate. So my advice is to keep it in there till age 60.
Follow these simple steps and watch your money grow! Maybe one day you will have enough money for a trip, new car, boat, or a house on a mountain. But, it takes a lot of hard work and saving to get there!