We all want to have a nest egg for when we are older. Or, for when our kids grow up. But sometimes the hardest thing about saving is actually getting started. Having figures floating around like 5000, 100,000 and more makes it feel like it is almost impossible.
But here are some tips for you to be able to get started.
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Record Your Expenses
When you start saving money, you need to know where you are spending money. Over the course of a month spend as you usually do, and at the end of that month go through all of your transactions. Once you can spot patterns in spending, and where you are spending money that you don’t have to, you will find places to save. Every coffee, all of the food, and typical bills like utilities and rent/mortgage all need to be taken into account. If you find it easier you can round up to the nearest whole number to work it out.
You should also include your credit card payments.
It is harder to keep track of smaller change that is spent – so where possible stick to your card for this month.
Budget
Now you have all of the data you can begin to organize and record all of your expenses into a workable budget. Your budget should have a neat total of your income and your outgoings. You should also think about things that aren’t monthly like car maintenance. A mistake many people make is that they try to maximize their disposable income by not being all that honest about their outgoings. So try and be honest with yourself about things.
Plan Your Saving
With the disposable income that you have, it is time to plan in the savings. It is usually recommended that you try to save between 10 and 15% of your income as a minimum. If you are looking at your expenses and they don’t allow you room for that much of a saving then see where you can realistically cut back in your expenses. Many people assume that they can’t save, but that is because they haven’t been through the first two steps.
Goals
When you choose something to save for, generally it makes it easier to want to put that money away. In general, when we make a note of our goals, we are more likely to reach them. Break each of the goals down into smaller amounts over weeks or months, and you will have a clear idea how much you need to each one. This works well for weddings, big holidays, down payments on the mortgage and other more significant items.
You can also have some short term goals too, like an emergency fund or paying off debt. Often when there is a lot of debt is better to seek out secured debt consolidation loans – so that you are just dealing with one payment, not many.
Priorities
When you are writing down everything that you want to save for, make sure that you put the most important ones at the top, and put the most amount of money into those. Typically paying down debt will be at the top of the list. You should also be sure that you are planning for retirement, although from time to time this might take a backseat while you get other things sorted.
Saving Tools
When you are saving for short term goals, you might like to take a look at some of the options below.
Short term
A regular savings account will work for you in most cases
If you have a little more money than a Certificate of Deposit, which locks your money away for a fixed period of time is a great option – and usually offers a higher interest rate
- Long term
- Stocks and bonds
- Real estate
- IRAs
You don’t have to just pick one savings option, you can select multiple ones that work with your savings goals and the amount that you have to put away. Most people get by just fine with a savings account to start with.
You can make you saving automatic too. You can set up direct deposits or direct debits, or work with an app like Cleo or Plum – they automatically calculate what you can save each month and put it away for you.
Strict
You will need to employ a reasonable amount of willpower to not spend your money as soon as it starts to pile up. And, that you should be sure that you still to the plan that you have created.