It’s Finance Friday! Eek! I’m so excited! Being healthy is about so much more than being active and eating well. It’s about making healthy decisions in all areas of your life…which is why I’m writing about one of my favorite topics: Personal Finance. I truly believe that this is an important topic, and I hope you’ll read along!
Have you seen the yearly savings plan that’s floating around on the blogosphere? Basically, for 52 weeks (one year), the plan encourages you to save progressively one dollar more each week. So, for the first week, you save $1. Then for the second week, you add $2 to the saving, etc. On the last week of the year, you put away $52, and you find that you have a grand total of…less than $1,400.
Now, I am all about saving money. Really, I am. So, if all you can save in one year is $1,400, then you are doing very well to save that. But, what can you really get if all you’ve saved in a year is $1,400? It’s not enough for a car. It’s not enough for a vacation. It’s likely not even enough to pay a month’s living expenses. I’m going to go ahead and suggest that if you live above the poverty level and modify your spending just a little, you will be able to save more than $1,400 in a year. And I’m going to give you some sage advice on how to do so:
1. Choose what you want to save for. This is an important key for saving. Why? Because it’s motivating. If you have something in mind that you’re saving for, you start to imagine the possibilities. You get excited as you see your savings growing, because you know specifically what those savings are going to get you. It’s even suggested that you should start to plan specifics around what you’re saving for. For example, instead of saving for a house, start imagining what that house will look like, what neighborhood it will be in, etc. The more you can make the savings meaningful to you, the better. In the case of Husband Saign and I, we have 3 main savings goals: a house, a car, and vacation.
2. Set specific monthly savings goals. Make a commitment to your self and your spouse (if you have one) about specifically how much money you will save each month towards each goal. Factors going into these savings goals should include what you can reasonably afford to put away based on your income, and what you’ll need to have saved in order to actually proceed with purchasing the items that you’re saving for. For example, we put more than twice as much into house savings as we do into vacation savings, because houses are a lot more expensive than vacations! We also increased our savings goals after I got a raise.
3. Set up separate bank accounts for your savings goals. This is done so that you stop thinking about that money that you’re trying to save as part of your disposable income. Kind of “out of sight, out of mind” for personal finance. I also recommend setting up separate accounts for each of your savings goals. This is helpful because it takes a lot less organization on your part. All you do is put your monthly goal into each account each month. If you just had one big savings account, you would have to record somewhere how much of the money in that account was meant for vacations, and how much was meant for buying a speedboat. It would get a bit messy. Avoid that mess by having separate accounts for each savings goal.
4. When you get your paycheck, pay your savings accounts before you pay your bills…or spend money. I don’t actually really follow this one, as we keep ourselves on such a strict budget that I don’t have trouble coming up with the money to put in my savings accounts. Nor do I spend the money before I get a chance to save it. BUT, if you are one who is at risk for spending money that you intended to save, the recommendation is to get the money into your savings accounts immediately after receiving your paycheck.
5. Stick with it! Sometimes saving money is not easy, but the extra peace of mind that you will have if you’ve got a good savings plan in place is priceless.
Are you good at saving money? Any saving tips to add to these 5?