Golden Plains Area Extension agent
A key principle to building wealth is saving money. Studies show that people who develop a habit of saving regularly, even small amounts are successful. Setting aside money helps to form a savings habit. This is called “Paying Yourself First”. Paying yourself first simply means setting aside money before there is a temptation to spend it. Arrange with your financial institution to automatically transfer a certain amount from each paycheck to savings. Over time, it will add up and you will be building wealth.
Here are some strategies to use for successful savings.
Set Yearly Money Goals
Set personal financial goals to provide focus and motivation for your savings habits. Goals help you use your money to do the things that are important to you and your family. Saving money, improving your financial health, and building wealth starts by setting a goal and making a plan to reach that goal. Goals must be SMART — specific, measurable, attainable, results-focused and timeline.
By yourself or with your family, figure out your goals. Do you want to set up an emergency cash fund, get out of debt, make a down payment on a car or home, or put away money for college or retirement? Consider keeping your list of goals short. It will be easier to make progress towards them. With fewer goals, you will more likely keep “on track” toward meeting them.
Whatever the goal, write it down and figure out how to work towards it. First you need to establish a time frame and calculate the amount of savings you need weekly or monthly to reach the goal. Be consistent with saving money for your goal. Treat it like an expense or bill needing to be paid. Make it a priority. With regular savings, even small amounts can add up quickly.
Make Savings Automatic
Finding money to put into savings can seem difficult. However, there are some strategies that can make it easier. The easiest and most effective way to save is automatically. Deposit a portion of each paycheck into a savings or investment account. By saving automatically, what you don’t see you won’t miss. Stick to your plan; once you start saving, it gets easier and easier. Before you know it, you’re on your way to making your dreams a reality.
Take Control of Your Spending
A spending plan or budget can help families spend hard-earned dollars more effectively, live within their income, reduce the need for consumer credit, save for things wanted and develop skills in financial management. Manage your spending by tracking your money, including cash in your wallet. Record all expenses, including all bills and any random spending. Save all your receipts and keep track of how much you spend each day. It helps you know where your money is going. It also helps identify spending habits that can be revised and allocated towards your goals. Commit to tracking your expenses for two to three months to get an average of how much you spend monthly. There are many ways to track expenses, whatever method you choose, stick to it.
Practice Delayed Gratification
Resist overspending; live a frugal lifestyle, and avoid impulse buying. Before making a purchase, no matter how large or small, consider these questions:
• Do I really want and need this?
• Is it even good for me or my family?
• What would happen if I could not have it?
• Is there an alternative I can accept?
• Why am I buying this? Bored? Depressed? Obsessed with a sale?
• What must I give up to have it?
• Is there a better way to use this money?
America Saves, a campaign managed by the nonprofit Consumer Federation of America, seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth. Non-profit, government, and corporate groups participate in America Saves nationally and through local, regional, and statewide campaigns around the country. America Saves encourages individuals and families to take the America Saves pledge and organizations to promote savings year-round and during America Saves Week. Learn more at americasaves.org and americasavesweek.org.
Make a commitment to yourself and your family to improve your financial health and build wealth in 2018. Check your progress every month and watch your savings grow!