It’s human nature. We’re all wired to meet our immediate wants, whether it’s indulging in a tempting bowl of ice cream, spending more time than we planned scrolling through social media, or treating ourselves to an impulse purchase.
Unplanned expenses or emergencies are other common life events. A car or house repair, or even a weather-related emergency, can make a dent in our budget.
Whether it’s the struggle of delaying immediate rewards for greater benefit in the future, or an unexpected expense, people looking to build a successful savings habit often run up against these very human challenges.
To help manage these realities, here are five tips we suggest to jump-start your savings.
Build Your Budget
To set yourself up for savings success, build a simple budget. Think of it as a road map that tells you exactly where you are in terms of monthly income and expenses, what money is available to save each month, and if you’re on track. A budget helps you monitor and track your financial progress. The most important part of your budget is updating and monitoring it regularly. Build it in a format that works best for you – using a smartphone app, spreadsheet or simple notebook. Keep it in an easy-to-find spot to track your income, spending, and savings as you go forward. Check out this Budgeting Worksheet from our friends at GreenPath Financial Wellness to get a handle on your monthly income and typical expenses, including credit card debt or other loan payments.
Set SMART Goals
The SMART acronym provides a strategy for reaching savings goals that are Specific, Measurable, Achievable, Realistic and anchored within a Time Frame. As an example, depending on your specific situation, perhaps you can tuck away $20 each week to hit an annual savings goal of $1,000. Measure your progress each week and modify it as needed. By keeping it SMART, you will more likely achieve savings goals when bite-sized amounts are saved over a realistic time frame.
Many people find it hard to save money when struggling with high credit card debt. The longer you carry large balances, the more of your monthly payment is applied to interest, and the less you have to tuck away in a savings account. You will save the most money by starting to pay as much extra as you can on your highest-interest debt first, and then once that’s paid off, move on to your second-highest-interest debt, and so on. If you’re struggling to make a plan to repay debt on your own, there’s help! Take a look at some of our debt consolidation loans we have to help you regain control of your finances. Or, try working with a trusted national nonprofit like GreenPath Financial Wellness, which is proven to help people manage debt and jump-start savings.
Build Your Emergency Fund
A savings plan should include building an emergency savings fund to handle unexpected expenses and setbacks that can come up suddenly. A general rule of thumb is to set aside three months’ worth of living expenses in your emergency fund. This buys you some time if something were to happen. If that isn’t realistic for your situation, start with what you can. It’s most important to get into the habit of prioritizing your savings and to begin making progress. You don’t have to bite off the whole goal all at once.
Set it and Forget It
The most successful savers automate monthly deposits to make it as painless as possible. Decide how much you can put into savings and set yourself up with an automated transfer. Another good option is to automatically direct deposit a portion of your paycheck into savings every payday. Begin with an amount you can afford to put into savings and look at your big-picture plan to set your savings goals in the long term.
Saving for the future is closer than you think. Building savings can seem like a daunting task, but you will start to see results with practice and patience.
Let’s Make a Plan Together
If you’re unsure how much you can reasonably save each month or need a helping hand getting started, you can request a FREE one-on-one consultation with one of the many financial counselors at GreenPath. A counseling session typically takes about an hour, and you can expect to have a confidential conversation with your counselor to discuss your situation, review income, expenses, debts, and credit report, talk about goals for the future, and come up with an action plan for what to do next. There is no agenda or sales pitch. GreenPath is here to help. Call 877-337-3399 to get started.