From building an emergency fund to saving for big expenses and building wealth, a monthly savings plan can significantly enhance your financial security. While starting to save may seem overwhelming, there are big and small steps you can take to help you end each month with a larger amount in your savings account than you had at the start.
1. Set Realistic Savings Goals
The first step in achieving your savings goals is to set achievable and realistic objectives. You may want to start with small goals such as:
- Saving $50 a month
- Saving ten percent of your income
- Committing to save $500 by the end of the year
Setting an initial smaller goal will increase your likelihood of success and prevent you from feeling overwhelmed. Once you can meet those goals for several months, you will feel motivated and capable of increasing the amount you save. Don’t jump from trying to save $50 a month to $500. Instead, gradually increase your goals to avoid feeling pressured or discouraged.
2. Save in Specific Categories
Once you establish a solid budget, work on cutting expenses in specific categories. Any amount you save by reducing expenses can be added to your savings account. Focusing on one or two categories each month can help you find ways to decrease what you spend monthly, such as:
- Utilities: Reduce heating or electricity bills by checking for leaks, turning off fans and lights, unplugging unused appliances, and adjusting the temperature a few degrees up or down.
- Entertainment: Try borrowing books and movies from the library instead of buying them, or reduce the number of streaming services you subscribe to.
- Transportation: Consider using public transport, biking, or walking to work instead of paying for gas and parking.
By shifting your focus to a new category each month, you will develop new spending habits across a range of behaviors. It will also reduce the likelihood of you starting to feel frustrated or deprived by making the same sacrifices each month.
3. Set Specific Goals
If you care about achieving goals, it may be helpful to have a specific purpose for the money you save. This differs from setting a goal to save a certain amount, like $200 a month. You may have savings designated for:
- A vacation
- Traveling to see family
- A down payment for buying a home
- Early retirement
- Education expenses
Knowing what the money is saving for can help you measure progress and stay motivated. It can also make it easier to forgo something you want today, like new clothes or dining out, if you know what you will be able to get in the future instead.
4. Find a Financial Advisor
If you’re struggling to identify where and how to save, or even what types of savings you need, consult a financial advisor. These professionals can:
- Identify strengths and weaknesses in your financial health
- Help you create a plan for managing your money
- Inform you about the types of savings you need to achieve your goals
- Assist with long-term planning, such as retirement or investing
When choosing a financial advisor, look for someone you feel comfortable asking questions and getting answers from, and if you’re just starting to take control of your finances, seek an advisor who charges fees only, rather than one who earns commissions on your investments.
5. Start Building Wealth
Once you have emergency savings and have started saving for retirement, don’t stop setting aside a portion of your money each month. Instead, begin to formulate a plan for using those monthly deposits to build wealth. The best way to do this is to start investing.
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Many mutual funds and brokerage firms require a minimum initial investment, typically ranging from $1,000 to $10,000. You can save that initial amount faster by keeping it in a high-yield savings account, which will earn interest while you save. You can also use that time to start learning about investing.
If you are already working with a financial advisor, they can help you create an investment plan and identify ways to start building wealth and improving your financial security.
Building your savings doesn’t happen overnight, but creating a plan to start saving can happen in a short time. By starting with small, consistent steps, you can build a saving habit, create a financial cushion, and replace the stress of living paycheck to paycheck with the confidence of knowing you have control over your money.
Source: https://www.thebalancemoney.com/how-can-i-increase-the-amount-i-save-2386153
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