Does your money seem to fly out of your hands as quickly as it arrives? If so, you are not alone. Most of us feel that way at some point in our lives. There is no magic solution to this problem; it just requires a different mindset and habit. The inability to achieve financial goals, financial insecurity in later life, and increased expenses lead to stress when emergencies or unexpected events happen. We can end up losing our homes and standard of living when we lose our job. Having a savings provides a pot of money to achieve your financial goals and take care of your future self.
#1 Set Goals – What are you saving for? Goals could include building an emergency fund, saving for a down payment on a house, or reversing a trend of increasing debt. It is helpful to create a roadmap for handling your money: Spending, saving, using credit and investing. Set your goals and make them reasonable – unrealistic goals will just discourage you. People who follow their roadmaps are able to live comfortably and purchase things without guilt or stress. Those who do not have a plan often worry about having enough money for the things they need and want.
Even though financial planning can have a big impact on the quality of life, it is pretty simple to do. In fact, making clear, meaningful goals boils down to five steps:
#2 Make a Plan – Outline a plan to meet your goals, in terms of saving a percentage of your savings goal by a specific
time. If you do not put a time limit to the plan, your goals will always get pushed back to sometime in the future. The easiest and most effective way to save is automatically. This is how millions of employees save through 401(k) and other
retirement programs at work. It is also how millions of Americans save at their bank or credit union. You should always
start small by creating a realistic goal with a realistic timeline. You will find you don't miss the money, you'll get excited
on how fast it is growing, and you'll want to add more when possible. Make it a game; get family and friends involved.
Surround yourself with others who want to win financially instead of those who are often looking for ways to spend their
money.
#3 Define Needs vs. Wants – This can be difficult but it is necessary. If you find you cannot pay
your bills, think if you really need a premium cable TV package? Down deep, you know what
your priorities should be. The key to saving and winning financially is to know where your
money is going. This makes you aware and empowers you to make decisions, to act on your
money rather than let your money act on you. You decide. Redirecting money to its highest and
best use vs. having no idea where it went.
Depending on if you utilize technology, or would rather track your spending the traditional way, there are many options
you can use depending on your preference. Mint.com is a simple personal financial program that’s web-based. It’s free to
sign up and only takes a few seconds to add new accounts. Every time you visit their site, your financial data gets updated
automatically when it connects to your personal bank accounts. It presents your financial information in a slick easy-touse
web interface, with detailed graphs. It’s very helpful for modern day budgeting, creating goals and aggregating all
your financial accounts in one place. Mint’s dashboard gives a quick summary of your personal finances at a glance. For a
more traditional approach, you can track your spending using our “Track your spending” worksheet
#4 Create Budgets and Stick to Them – Assess your income and expenses realistically, and make budgets. If you make
weekly or monthly budgets, do not forget about large annual expenses, such as tax bills or insurance payments. Leave
room for an occasional treat as you can afford it to avoid getting discouraged. To easily create a budget online you can use
one of the following resources.
Some people find it easy to use the cash budget using envelopes separating each of your expenses to use each month. The
envelope system is when you use cash for different categories of your budget, and this cash is distributed into separate
envelopes to help you stay on track. It allows you to see exactly how much money you have left in a given category by the
cash that remains on hand. When the envelope is empty, you are either done spending in this category or you have to
move money from another envelope into the appropriate one. By using this method, you will only use the cash that you
have budgeted for each category. Be sure to put money into savings first and then live off of what you have left. Savings
usually is a result of decreased spending rather than increased income.
- Internet, TV - call, compare, ask for deals
- Phone - cell and home
- Insurances - compare premiums, look at higher deductibles
- Credit - checking report, improving credit
- Fees – eliminating fees on bank accounts, late fees, etc.
- Snacks, coffee, soda, bottled water – reduce or eliminate or buy at grocery store in bulk
- Eating out - reduce the amount you spend each month
- Comparison shopping - food, clothing, etc. It is good to compare but only buy things you need, not because it is on sale or a “good deal.”
- Limit spending on gifts
- Pay off high-interest debt
- Gas – limit driving
- Unused gym memberships – either go or stop paying and workout at home
#5 Create a Second Savings Account – It may help to create a second savings account that serves as your “piggy bank.”
This savings account should be used to save for specific goals or to build an emergency fund. With direct deposit, you
may be able to have a portion of your paycheck sent to this account. After some time, you may “forget” about it with
respect to the daily bills and the temptation to overspend will be reduced.
#6 Pay Yourself – Treat yourself as if you were just another person to whom you owe money because in essence, you are.
Pay your “bill” to yourself regularly every month and include that as part of your budget. Use direct deposit if the
resources are available. Should you miss a “payment,” charge yourself a “penalty” to be included in the next month’s
deposit. All this “pay” should go either into your second savings account or immediately into some form of investment.
These investments can range from low-risk, high-yield savings or money market accounts to higher yielding investments
like stocks and bonds. Regardless of the investment vehicle, what matters most is that you set this money aside.
If you enjoy utilizing technology, the Acorns app or Digit invests your spare change.
It rounds-up to the nearest dollar every credit card purchase and micro-invests the difference into a separate bank account.
The money can be used to invest very small amounts of money into these market accounts.
#7 Minimize Withdrawals and Transfers – Even if there are no charges for moving your money around, treat your
money as if it were less accessible than it really is. That way you will be less tempted to stop at the ATM for impulse
purchase money
#8 Manage Your Debt – If you have high-interest credit card charges, pay them off as soon as possible. As you pay off a
debt, transfer at least some portion of that regular payment you used to make into your savings account to avoid spending
temptations.
#9 Take Advantage of Discounts – You do not have to be an extreme couponer,
but there is no reason not to take advantage of discounts available to you in anything
you purchase. Many wealthy people attain and maintain wealth because they do not
pay any more than they have to. Take advantage of your local newspaper coupons,
shop grocery advertisements, and save money on everyday expenses. You will be
surprised how much money you can save each month using these resources.
#10 Minimize Use of Credit – Credit is essential at times, but easy credit also can mean easy overspending. If possible,
never charge more to a credit card than you can afford to pay at the end of the month. Using credit comes with a price, and
the biggest part of that price is usually the interest rate. By spending too much on your credit card, you will gain interest
charges which can add up over a period of time. Shop around for credit cards with low APR rates and avoid companies
that offer teaser rates. For example, credit cards that offer no interest for 6 months. Ensure you read the fine print to shop
around for the lowest interest rate rather than falling for the introductory offers many credit card companies offer.
Saving is primarily a mindset and an attitude. It will get easier as you practice it on a daily basis and as you see the
rewards from consistent saving. As you build the habit of saving, you will be able to accomplish your financial goals.
Want to learn more about how to make saving money easy and automatic? Watch our Easy Ways to Grow your Savings
webinar.
In this webinar you will learn:
- why we want to save
- why we tend to not save
- the benefits of saving and consequences of not saving
- how to improve our saving behavior
- tools to use to make saving easy and automatic
The Bottom Line – Start small and begin today. Select an idea above that you can implement right away. As you take
steps to save, your financial outlook will improve and your financial stress will decrease. You will get excited about
saving and will begin to make other changes in your life to help increase the amount you are saving each month. Make it
a game. Have fun. Start saving today!
Bryce Jorgensen, PhD
Family Resource Management Specialist
Jennah McKinley, M. Ed.
FCS Agent Eddy County CES
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