In our previous blog post, we shared some strategies to help you fulfill your New Year’s resolution to save money.
In the same spirit, we want to talk about how you can plan ahead now to experience success in saving money all 2014 long. Like so many things, preparation and planning ahead are key to experiencing long-term success.
5 Steps to Save All Year Round
- Set Your Saving on Automatic. Do you know that you want to save $100 per month? The easy way to do this is to set up an automatic saving arrangement. There are at least a couple of ways to do this. If your employer offers direct deposit to multiple bank accounts, you can arrange to have $25 per week or $50 every 2 weeks automatically sent to your savings account. You may also be able to set up a similar arrangement with your bank to have a certain amount automatically transferred over from your checking to your savings. It helps to “fix it and forget it” if you are looking to save time and eliminate any possible excuses.
- Develop a Debt Exit Strategy. Are you paying hundreds or even thousands of dollars each year on interest? If you have bad debt that has been hanging over your head, now is the time to develop a plan to pay it off. Start with the account that has the highest interest rate, and determine how much you can afford to pay each month. Once you pay that debt off, move on to the next highest interest rate. Continue until you have all bad debt paid off — then you can certainly move on to installment loans and other forms of “good debt,” like student loans and car payments. Paying them off early can save you some interest over time (it is always wise to make sure that there is no pre-payment penalty on scheduled installment loans). Don’t forget to get any outstanding medical bills paid off so that they do not end up as a negative mark on your credit. If you cannot pay the total amount, set up a monthly payment arrangement with the hospital or doctor, and stick to it until the balance is eliminated.
- Establish a Method to Your Madness. Do you lack organization when it comes to your finances? Without proper organization and a system, you can forget to pay bills, fail to file your taxes on time, and overdraw your bank accounts. All of these financial failures can lead to serious consequences, so it is essential to determine how you will keep track of your finances on an ongoing basis. Whether you prefer to use your online bank account, accounting software, spreadsheets, or an accounting mobile app, develop a system, and use it. Don’t forget to figure out how you will file paperwork for future reference, including items needed for tax time. Being more diligent when it comes to your finances can help you save money and enjoy greater peace of mind.
- Set and Work Toward Financial Goals. Do you wish that you had more money to go back to school, go on vacation, or buy a home? These milestones don’t just happen — you need to make them happen by setting goals in advance and then working towards your goal. Now is the time to determine what your financial goal is and how you can accomplish it. It could be a short-term goal, like going on a luxury cruise, or a long-term goal, like saving up for a comfortable retirement. It’s important to be realistic about what you want to accomplish and how much it will cost. It’s also vital to create a realistic plan and timeline that you know you can commit to. It’s often helpful to start out with a smaller goal — say, saving up for a new washer and dryer — and then work your way up to larger goals. A goal savings account at your local bank or credit union can be a great tool in this process.
- Find Practical Ways to Reduce Your Spending. Let’s be honest: You’re always going to have to buy things, whether it be clothing, food, furniture, or vehicles. But if you are trying to reduce your spending, one way to do so is to determine what is really necessary. Ask yourself if you really need an item before you purchase it. Another way to get what you need and still reduce your spending is to find creative ways to spend less. Especially with the Internet, it’s easier than ever to do some quick comparison-shopping and find the cheapest place to buy what you need. A great example of this is eBay. Originally known for online auctions, eBay has expanded to offer “Buy It Now” options that allow you to pay a set price (determined by the seller, although you can sometimes offer your own best price). eBay has thousands of listings in every category, making it easy to get what you need at a cheaper price. When you use your FreeShipping.com membership, you can save even more!
Saving does not just happen. You need to think and plan ahead in order to accomplish your financial goals. When you follow these steps, you will be on your way to a frugal and prosperous New Year!
Do you know someone who needs help getting their financial house in order? Be a pal, and share this blog post with them.