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Very few Americans can save enough money to survive, and many can’t even pay for an unexpected expense if it comes up.
But savings are the foundation of a strong future.
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If your future isn’t as different as you’d like it to be, there are steps you can take to correct that situation.
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have an end goal
First of all, it is important to know what you are saving for. This might help inspire you.
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Perhaps you want to be financially independent so you don’t have to work to support the lifestyle you’re seeking.
Even if you think your dream won’t come true, have fun thinking about what you would do if you had the money.
You may want to set some short-term goals, such as buying a car or helping your kids pay for college.
There are a few ways to help you achieve these goals. If you want to help your kids pay for college, you can set up a savings plan.
Know that you may not be able to cover the full cost of their education, so you may want to look at other options along the way.
Co-signing student loans can help them get approved. You can view a guide with more information about your rights as a cosigner.
Factor inflation into your plan
Inflation can reduce the value of your savings, so if you’re not actively investing, your money is losing value.
Your money needs to grow faster than inflation in order to build wealth.
Your financial needs also evolve over time, which means you’ll need to plan carefully and re-evaluate those needs.
Gradually increasing the percentage of income saved can also help in tackling inflation.
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Cut Your Expenses Where You Can
Cutting expenses will give you money to pay for your goals.
View credit card and bank account statements to see how you’re currently spending your money.
If you don’t know how to do this, you might consider connecting your credit card and banking information to an app or site that will help you do this.
List unnecessary expenses like memberships, gym memberships, or cable channels.
You can access free options for these things by using your local library, exercising at home, and viewing more free content online.
Consider bringing your own food and beverages from home instead of buying them when you go to work.
For all essential bills like internet and phone bills, see if you can negotiate with your current provider to lower them.
If you can’t then it may be time to shop around for a different provider.
budget your money
Many people don’t want to budget because they feel it can deprive them of enjoying their money. But the opposite is true.
A budget can give you more financial freedom by helping you save for the things you really want to spend your money on.
Creating a budget can help you take back control of your finances, ensuring that you spend your money in a way that better reflects your values.
With a budget, you can allocate money to long- and short-term needs before buying the things you want.
Budgeting means that you have to reconsider some of your desires and determine which ones to prioritize first.
But it can also take away the stress of not having enough money for your bills because you’ve already taken care of them.
pay yourself
When you budget, you can save for future goals, like buying a car or going on vacation, but it’s important to pay yourself with each paycheck before anything else.
This ensures that you keep the money in your savings accounts instead of letting it go on separate budget purchases.
If you have a retirement plan with your employer, it’s much easier to pay yourself first because the money can be deducted from your paycheck before it ever hits your checking account.
Review your retirement contributions to make sure you’re taking advantage of at least the full match offered by your employer.
You can usually split your direct deposit money between accounts, so consider having a portion of your paycheck go into your savings account so you never miss out on money from your spending accounts.
Monitor Your Credit Score
Many important milestones in life, including buying a home or a car, require more money than you have available, so you may find that you need to take out a loan.
Having a strong credit score can make it much easier to get a favorable rate.
It is wise to keep track of your credit score even if you are not planning to take out a loan to ensure that no errors are made.
stick to your plan
Even if your income increases, you should still stick to your monthly expenditure target.
This helps you live below your means and avoid going into debt. You can use an app or worksheet to track expenses, and there are tools that will help you monitor spending and send you alerts when you’re spending too much.
Depending on the tool, you may even get an alert if you’re overspending in a certain category.
Counting every penny ensures that you stick to your goals; if you don’t like this method, you can put money into a dedicated checking account and allow yourself to spend a set amount each month.
When the money runs out, there will be no more until the next month.
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grow savings over time
Your peak earning years are in mid-life, so it makes sense to increase savings as your income increases.
If you feel that you are not saving enough now, then start saving as much as you can and then gradually increase it.
Some companies automatically enroll employees in a retirement plan, saving a large percentage of their pay each year. This can help you build wealth over the years.
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Last updated on March 29, 2023 by Emma
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