Everyone knows how important it is to put money into savings regularly, but research shows that many Americans have no emergency savings at all.
If you're ready to start saving but don't know where to begin, USALLIANCE is here to help! Here are seven simple steps that can get you on the fast track to building your savings today:
Step 1: Set a Goal
It’s always a good idea to work backward when setting up a plan.
Take a few minutes to think over your short and long-term savings goals. These can include saving for retirement, a dream vacation, or covering a large purchase like a recreational vehicle or a new phone. Make sure to assign a dollar value for each goal.
It's important to note that when you start putting money into savings on a regular basis, it’s best to start with building an emergency fund that includes three to six months’ worth of living expenses before moving on to other saving goals. Outlining your personal goals before you start will help motivate you on your journey toward saving.
Step 2: Start Tracking Your Expenses and Income
Determine exactly how much money you need to get through each month. For three months, keep a paper or digital record of your expenses and all income streams.
As you complete this step, include seasonal and occasional expenses. Determine an estimated annual expense amount for these costs and divide it by 12. Add this value when calculating your monthly expenses.
Review your expenses and income at the end of the three-month period to see how much money you require to live on each month.
Step 3: Trim Your Expenses
If you find that your income exceeds your expenses by a generous amount, you're in a good place and can skip to the next step.
If your expenses are greater than your income or the numbers are too close for comfort, it's time to scale back. Look for ways to trim your expenses without feeling the pinch. Start with your most significant non-fixed expense, and move from there, cutting costs wherever you can. The money you trim from your expenses can be used for savings.
Step 4: Create a Budget
With your newly trimmed expenses, you're ready to create a monthly budget. Designate an appropriate amount for each monthly expense using your list of monthly expenses and income. Be sure to include savings in your budget — as if it were actually an expense.
When working through this step, you can go the old-fashioned route and use pen and paper for a detailed budget or use a budgeting app.
Step 5: Choose Your Savings Tools
With your numbers all worked out, you can move on to choosing a place to park your savings.
Choosing a separate location for your long-term and short-term saving goals may be a good idea:
- For long-term savings, look for a savings option that offers an attractive interest rate. Remember that you may not be able to open a long-term savings account immediately if you don't have the funds required for your minimum initial deposit.
- Short-term savings are better off in an account that allows for easy access and some monthly transactions if needed, like a MyLife Checking Account.
Step 6: Make it Automatic
You’ve got your numbers worked out, and if all goes well, your savings should start growing today.
Unfortunately, though, impulses can sometimes get in the way of our best intentions, holding us back from reaching our goals. Keep this from happening to your savings by making them automatic. Set up an automatic transfer from your checking account to your savings account so you remember to feed your savings.
Step 7: Review and Adjust as Necessary
Your savings plan is good to go! Remember, the earlier you start, the more interest your funds will accrue.
While you may have automated your savings, that doesn't mean you can set it and forget it. Be sure to review your budget occasionally and check whether you should adjust the amount allocated for savings.
To get started towards your savings goals, click the button below.