How to Establish a Strong Foundation for Financial Success
SAVING MONEY IS A HABIT YOU HAVE TO PRACTICE
Even if you start with saving just your pennies and dimes a week, it’s important to establish a saving habit while you’re young. Start saving small, painless amounts and watch your savings account balance grow. You’ll be building your discipline to save money and it’ll motivate you to find more money to sock away.
YOU HAVE TO LIVE BELOW YOUR MEANS TO SAVE MONEY
Simply put, make sure you have more money coming in than going out. Overspending is the biggest financial problem for many, which can be addressed by creating a budget, living a lifestyle that’s realistic for your income and working toward healthy spending habits. For others, low-income might be the problem; if you’re in this boat, get proactive and look for professional opportunities, like promotions, networking, vocational training or more education.
SAVING MONEY IS KEY TO HAVING THE LIFE YOU WANT
You probably have many plans, dreams and goals for your life, from traveling to earning a degree, buying a home or getting married. Whatever you see for your life, more often than not you’ll need money to make it happen. But money to cover those expenses doesn’t just materialize, you have to save it up. Turn your dreams into realistic and concrete goals to start working toward your ideal life.
AN EMERGENCY FUND IS A MUST
Saving an emergency fund will protect you and help you keep your finances on track. Even when life hits you with unexpected or big expenses, you’ll have the emergency fund to act as a buffer for unexpected expenses instead of having to use money saved for other goals, or worse, go into debt. Try having and emergency fund of at least $1,000.
SUCCESSFUL SAVERS SET SHORT AND LONG TERM SAVINGS GOALS
Those who have the savings habit down know how to set goals and follow them. They set goals, like paying for a trip or buying a home five years from now, and break those into smaller steps. Savers know how much they have to save each month to achieve long and short-term savings goals, from this year all the way to retirement, and they use those goals as motivation to stay on track and avoid unnecessary expenses.
SHOOT TO SAVE AT LEAST 10 % OF YOUR INCOME
SAVING HAVE TO BE BALANCED WITH OTHER FINANCIAL GOALS
While saving money will always be an important part of your financial health, it’s not the answer to every money question. At times, your financial situation might call for you to put more of your funds toward other goals, like paying down debt, covering education or medical costs, investing or even covering day-to-day expenses when money gets tight. Once you have an emergency fund saved up, funds might be better allocated to other goals.
START SAVING FOR RETIREMENT NOW
Start saving for retirement now and you’ll have to put away less every month. Money you save in your 20s will be worth more in retirement than money you’ll save in your 30s or 40s. Plus a lot of employers will match retirement savings
SAVING IS EASIER WHEN YOU AUTOMATE IT
While saving money is a habit you can cultivate, you can also set up your financial system to work toward your goals for you. Most banks offer an automatic transfer option that can be set up to send an amount set by you to your bank account at a predetermined time — say $250 to your savings account on the first of every month. Alternately, you can also set up direct deposit through your employer to automatically move a portion of each paycheck into your savings account.
SAVING MONEY: THERE’S AN APP FOR THAT
For tracking daily spending and savings goals progress, try Mint. More and more banks are even offering their own version of spending and budget trackers. If you have a hard time finding the extra funds in your budget for saving, try money-saving app Digit, which tracks your finances and adjust savings accordingly, moving money into your savings account in such a way that you never miss it.
THERE’S ALSO A TAX BREAK: THE SAVER’S CREDIT
The IRS offers a tax credit that rewards lower-income taxpayers for saving for retirement, called the retirement saving contributions credit or simply saver’s credit. You can take advantage of this credit if you have an adjusted gross income of $30,500 or less in 2015.