The idea of saving money can be overwhelming, and it often seems like reaching your savings goals will take forever. For those who struggle to make ends meet every month, saving money is even more difficult. The key to building up your personal savings lies in preparation and taking an honest look at your income and expenses. No matter your income, you can use these tips to build up your savings.
Make a Budget That’s Easy to Stick To
It’s one of the most common pieces of advice, but it always bears repeating: to reach your financial goals, you need a budget. Knowing how much money is coming in and going out means you can control your finances, instead of your finances controlling you. The problem is that conventional budgets usually take a one-size-fits-all approach, making them difficult to follow.
To make budgeting more specific to your needs, start by separating your monthly expenses into categories such as rent/mortgage, transportation costs, food, entertainment, and savings. Always make sure that there is a dedicated category for saving money. Next, list the amount that you typically spend in each category and deduct it from your monthly income. Be honest with yourself during this step, because it’s important to have an accurate understanding of your spending. Once you know where your money is going and how much is left after expenses, you can create a savings plan.
Along with keeping track of what you spend, it is a good idea to see where you could potentially save more money. For example, if you have become used to paying a hefty mobile phone bill, contact your carrier to see if there is a less expensive plan option or consider switching carriers. Negotiating is effective for a variety of expenses, so it never hurts to ask. If you’re able to reduce any of your expenses, deposit the money saved into a savings account.
Weigh Your Options
Just as you can proactively work to lower your expenses, you can also shop around for savings and chequing accounts that meet your needs. When looking for any account, consider the features you absolutely need to have. For everyday banking needs like making purchases, withdrawing money from an ATM, and paying bills, a chequing account is the best choice. However, there are hundreds of chequing account options, and the ultimate decision will come down to your specific needs. For example, some banks offer accounts with no monthly fees as long as you complete qualifying activities such as maintaining a minimum balance or making debit card purchases during the statement cycle.
Consider factors like how often you use your card or your average balance before making a final decision.
You should also compare savings accounts and opt for one with easy to understand terms and an interest rate that aligns with your savings goals. If you are interested in a long-term savings plan, such as retirement, a higher education fund, or a trust, set up an appointment with a personal banker to discuss available options.
Be Specific with Your Savings Goals
The best way to meet your financial goals is to clearly define them from the beginning. Setting specific savings goals allows you to make the most of the money you bring in. Your goals can be separated into short-term aims, like going on a trip or purchasing new furniture; and long-term objectives, like buying a home or repaying a loan. Once you articulate exactly why you want to save money, it will give you some motivation to get started. After deciding what you’re saving for, determine exactly how much money you need to save and give yourself a deadline for reaching the goal. It’s important to be specific—if you’re vague about how much you need, you’ll have no way to measure your progress toward your goal. This can make you feel frustrated and could cause you to give up.
No matter your short or long term goals, an emergency fund is essential. Many people rely on credit cards for emergency expenses, but even a small amount of savings would eliminate the need to resort to credit in many cases. Numerous studies have shown that having at least some savings can have a huge impact on financial wellness. An emergency savings fund can come in handy when it is needed and will earn interest if it remains untouched. Ideally, you will want to have at least six months of expenses in an emergency fund. However, if this figure seems daunting, start small—aim to save up the equivalent of one month of expenses for a starter emergency fund.
A Final Note
If you don’t have much money left after paying bills, you can still make the effort to save what you can—remember, it adds up over time. If you get a raise, an unexpected monetary gift, or a better-paying job, try to keep your expenses at the same level and deposit the extra income into savings. No matter what financial state you are currently in, saving money will help you in the long run.