How to Start Saving for Whatever You Want
Saving is that thing, that we all know we are supposed to do, however many people never take the time to put a real savings plan in place. Many people are motivated to save for a specific item or event such as a car, wedding or a trip to Cancun and when the goal is reached the savings will often stop.
In a recent study done by Bankrate.com 26% of Americans had no money saved at all and only 18% of U.S workers felt comfortable that the money they had saved for retirement would be enough. So it’s obvious that we all need to be saving more, but for many people, they have no clue where to start, how they should save, where they should and how to set savings goals.
What are you saving for?
Knowing what you are saving for can be the biggest motivator for many and not having anything to save for is often the reason many people never start. Now that you have decided to save, let’s set a goal! What are you saving for? Are you hoping to finally build your emergency fund so that the next time something comes up you have the money to handle it and you don’t have to call home for help? Or have you decided that you will no longer miss those awesome girl trips and you want to have your money ready the next time your friends decide to go on one. Or are you over renting and would like to buy a place of your own? No matter what you are saving for, set a goal of what you would like to put money aside for and keep your eye on the prize as you begin this savings journey!
Set Your Magic Number
Now that you know what you are saving for, we need to determine how much you will need to save to reach this goal, let’s call this your magic number. This may take a little research on your part depending on what you are hoping to save for.. If you plan to begin saving to start your emergency fund you will want to aim for 3-6 months of your expenses. For example let’s start with a goal of 3 months of expenses saved in your emergency fund so that in the event you lost your job or anything happens you have the money to cover those expenses. To reach this magic number you will simply take the total amount of your monthly expenses, let use $2,000 and multiply this number by 3 months to get $6,000. Therefore the magic number that you need to save to reach your emergency savings goal will be $6,000. If you are saving for a trip to Europe and you determine that you will need a total of $4,000 once you add in travel, hotel, food etc., that will be your magic number to reach your travel savings goal.
Set Your Savings Strategy
Let’s create a plan to begin saving! So we know what we are saving for, we have set our magic number of how much we need to save and now we need to create a plan to reach our savings goal! This is often where people can get a little overwhelmed by how large the number is to reach their savings goals is.
To begin drafting your savings strategy, take a look at your budget and determine how much you can afford to save each month without it affecting your ability to pay your bills. Let’s say you determine that you can save $250/month and you get paid every two weeks. The best way to ensure that the savings occurs is by setting up the money to automatically be transferred to your savings account. You can typically do this on your bank’s website or go through your HR department and have them automatically deposit the money into your savings account on each pay day. You can split the $250/month savings amount into $125 every two weeks so it won’t feel like such a big hit. If you can stick with this automatic savings every two weeks you will reach your goal of $4,000 in this case in 1 year and 4 months, which can seem like a long time, however if you have been saving nothing before, you will love to see your bank account increasing every month.
Trick Yourself to Save More
You’ve set an amount to save every month and that is great! However, I know you can possibly save more and I have been able to successfully trick myself to do just that! If you want to trick yourself to save more and reach your saving goals faster there are a few things you can do. One of my favorite tricks is to pick a small amount… let’s say $10 and set it to automatically transfer to your savings account on a random day of the week such as Tuesday. You would probably spend this on coffee or happy hour anyone so you probably won’t even miss it. You can also sign up for a service such as Digit.co that will use a fancy algorithm to transfer small amounts out of your checking account based on your spending trends and place them into a savings account for you. The amounts are so small that you will not even notice it!
You are now equipped to begin saving and reach all of your savings goals! Happy saving!
This post was originally published on DominiqueBroadway.com and shared with permission.
Dominique Broadway is an award winning Financial Planner, Personal Finance Coach, Speaker, Finance Expert, Entrepreneur and the Founder of Finances De•mys•ti•fied & The Social Money Tour. She has a strong passion for working with young professionals, entrepreneurs and people of all ages to bring their Dreams2Reality. Dominique began working at major brokerage firms such as UBS Financial Services and Edelman Financial Services, at the ripe age of 21, focusing on clients with $10 million and up in investable assets.