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!
Saving money is one of the best habits a person can get into. Something I've noticed over the years is that people who save money when they are young, continue that habit throughout their lives and save up a nice nest egg for retirement. People who live pay check to pay check when they are young, continue that through their lives also - they might get a little better as they get older and make more, but they generally are not as good at saving as people who start young.
On #1: This is a good thing to do. I think most people will get a much better feel for where their money is going by doing this. Most will probably be surprised at how some things they thought were minor expenses really add up over time.
The picture shows a spreadsheet. An alternative is to just keep receipts for everything you buy. That means everything, even the coffee you buy on the way to work. Take the receipts and throw them in a shoe box for a couple of months. Then pull them out, and do some adding.
#2. I was always good at saving and never needed a budget. Just about every advisor says to do a budget, so it's pretty safe to assume they work for a lot of people.
#6. Pretty American centric :) CDs are good and safe. Mutual funds can be safe, or not. I'd stay away from the stock market unless you REALLY know what you are doing. The risk is extreme, especially for amateurs.
#7. Auto transfers to saving accounts are a big temptation. For people who are not as disciplined, I'd recommend auto xfers to something harder to get to, like mutual funds. An important phrase belongs here - "dollar cost averaging". If people don't know what that is, definitely look it up.
#8. YES!! This is what it's all about. This is where the addiction comes from. When you see that growth, you just want to see it keep going. You cheer it on - go go go! You get to the point when you realize that saving really does work. It's not what you make, it's what you save.
The thing to remember is this. Saving is the lack of spending. It depends entirely on controlling the spending. Every time you pick something up at the store, ask yourself if you really *need* it. Chances are that you don't. You want it, not need it.
One trick I used was to never spontaneous buy. I only bought what I went to the store to buy. If I saw a fantastic deal, I would not buy it, not then anyway. I'd buy what I came for, then go home. If I still wanted it when I got home, I'd go back. I rarely went back.
I would start a 401 or IRA at the very first opportunity, and max it out if possible. Someone under 25 might be less likely to have the opportunity or ability, but if they can do it they should. If not a structured retirement plan, then they can still try to save, even if it's only $5 a month. At a young age it's not really about the amount saved as much as getting in the habit and learning financial discipline.
But yea, if someone starts at 25 they are doing well. A lot of people don't start until they are in their 40s, or never start at all.
It is. I asked a question about selling or renting a house me and my father own but we don't know what to really do about it. Plus where I work at they recently set up a 401K for us so i'm learning more about that. It's like an investment where they put your money in a mutual fund in the Stock Market
I don't know say about that house. I am so inexperienced in this. I would talk to an experienced realtor or someone who knows the housing market well that you can trust.
We want to do it. independently. But where It is located it could take years. Because the town is pretty much a retirement town for Florida people to come to because they rarely get snow in Florida plus it's cooler in Tennessee than it is Florida. Plus no worries about Hurricanes
Me and my. dad are still going to have to discuss it. Selling it would make more. money, but like I said it could takes years. Renting it would be steady cash flowing in
Accounting (#1) is relatively easy compared to budgeting (#2), especially if you spend impulsively. Also, keep in mind that when you pay bills the money may not be taken out of your bank account on that day - depending on when you add things up this could prevent things from adding up correctly.
Saving 10-15% of your net income is a good idea. You should always have some spare money on hand because you never know what could happen unexpectedly (ex: car damage).
I'm doing #4 now - my goal is to save 10K in one year so that I can move to Ontario and take a yoga teacher training course.
Regarding #5, sometimes you just have to be patient.
After losing my job, saving money was the best thing I've ever done in case of events like this. Not to mention that I rent an apartment and have other bills. I strongly encourage everyone to do it.
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