The basics: Why saving is important and how to start.
Saving is a self-taught habit. It takes time and practice to master a new spending pattern and to become accustomed to monitoring your finances. Training yourself to save might seem like a hassle, but it’s an invaluable skill that will serve you well throughout your life.
Saving Pays Off: Why Saving Is Important in the First Place
While it might not offer an instantaneous reward, learning how to save does come with some serious long-term benefits. Not only will you learn to manage your money better, you’ll be able to work towards achieving goals that will improve your quality of life. You’ll also be more prepared if an emergency should occur.
Deciding on Savings Goals
When you start saving, make your first priority emergency preparation. Your primary and most important savings goal should be to build a financial cushion in case something goes wrong. Try to save enough that you can get by for a few months — at least three — without any income.
After you’ve shored up your emergency fund, start thinking of additional savings goals. Recall the hopes you have, but don’t think you can afford right now — a down payment for a house or car? A vacation to Aruba? A retirement income?
Learning how to save is about keeping those long-term goals in mind and eventually achieving them. Figure out how much you need in order to reach your savings target. Then, figure out how much you can contribute to that fund every month. Aim to set aside that amount as often as you can.
How to Start Saving
Here are a few simple steps you can take to start saving:
Open a Bank Account
Check cashing can get expensive. Consider opening up an account with a financial institution — like a bank or credit union — so you can have your paycheck directly deposited into a secure location. Be sure to look into all your options, determining which account makes the most sense for you. Keep an eye out out for yearly or monthly fees.
Understand your Current Cash Flow
Once you begin examining \your cash flow, you’ll gain a better understanding of the steps you should take to start the saving process. Closely monitor the money that you earn and spend. An easy way to track of your cash flow is to keep your receipts and examine your bank statements at the end of the month. To free up more cash for saving, cut back on nonessential spending, like entertainment or monthly subscriptions.
Late fees are another additional expense that you can learn to avoid. Be sure that you’re aware of how much your bills will be and when they are due. If you’re concerned you’ll forget to make a payment and incur a late fee, consider paying ahead of time or attaching your bills to your checking account – that way they can be deducted automatically.
Set Aside Cash Every Month – Before You Pay Your Bills
Dedicating more brain space to monitoring your finances may be a challenge at first, but your bank or credit union can help make it easier. Many financial institutions will now allow their customers to automatically transfer a portion of their paycheck into a savings account. Even if you start out by setting aside just a small portion of your income, you’ll be on your way to meeting your saving targets.
Save a Portion of Any Unexpected Cash Injection
If you get a raise, bonus, or some other form of unexpected cash award, think about setting some of it aside. Even a little bit will help you reach your savings goals faster.
It can be tough to get started saving, but as you watch your money grow month by month, you’ll feel closer to your long-term goals. As you carefully examine your spending and saving each month, you’ll become more familiar with your finances. Once you’ve start saving from every paycheck, it will become a habit. Training yourself to save can take a while, but the first and most important step is to start.