One of the most significant challenges when it comes to savings is getting started. It can sometimes prove difficult to identify ways that can come in handy when starting out as well as how to use your savings to attain financial freedom. This guide will explore some of the different ways that can help you achieve a realistic savings plan.
Keep a record of your expenditure
The first step towards attaining a saving scheme is understanding how much you spend. That said, ensure that you have a record of all your spending including the snacks you buy, newspaper, coffee and so on. This means accounting for every dollar spent, and once you have the data, you should classify them by category and total each amount. Also, try and have most of your transactions done using bank statements or credit cards since it makes it easier to break down your expenditure.
Come up with a budget
Once you’ve got an estimate of how much you should spend each month, you should start organizing your expenditure into a reasonable budget. One of the key areas that your budget should explore is ways on how your expenditure can measure up to your income. This is important since it makes it easier to have a spending plan and reduce overspending. Apart from the monthly expenses, you should include costs that do not occur on a monthly basis like car maintenance.
Come up with a savings plan
Once you have a budget in place, it’s high time you should come up with a savings category within it. To achieve a sound savings scheme, you should put between 10 to 15% of your income as savings that’s if you have enough income to achieve it. If you realize that you are spending more than what you can save, it's high time to cut down on expenses. To achieve this, identify non-essentials which do not need heavy spending such as dining out and entertainment.
What are savings for?
It is much easier to save money if you already have a goal in place. That’s why it’s important to start thinking of what you are saving for. It could be that you are looking to have an ideal way of paying your insurance premiums from the home insurance quotes you just got or you are making a down payment for a new house. Regardless of what you are saving for a short term or long term goal, understanding how much you can save will help you figure out how much you have to spare. If you are looking to save for your children's education or retirement, you should consider having an investment account. Although some investment might be risky, it’s an excellent opportunity for making investments since you can earn compounded returns.
Take note of your priorities
After your income and expenses, your goal will still have a significant impact on your savings scheme. Also, it’s important not to forget your long-term goals since they are just as important as your short-term goals. Most importantly, you should figure out how to prioritize your goals as it gives a clear indication of where to start off on your savings. For instance, if you are looking to replace your car in future then you could have a savings plan for one.
Seek ways to gain additional Income
We live in the generation of side hustles. Money is everywhere, and surprisingly, there are lots of unique and simple ways to get some side cash. Gig work, driving services like Uber and Lyft, and taking advantage of bank bonuses can allow you to make some quick side cash to cover unexpected expenses.
Settle on the right tools
If you are looking to make savings for short-term goals, then you should consider using the bank money market savings account since it comes with a high interest rate which increases as you grow your savings. The high-yield savings account is also a great alternative given that it features high-interest rates compared to the regular account. For long-term goals, you could opt for securities such as mutual funds or stock which is available through investment accounts.