Not enough can be said for having a savings account. In this era of debit and credit cards, saving is low on the personal goal list for many people. While they may have every good intention of putting money aside, its priority ranking is still toward the bottom.
More than ever, however, people need to have money put aside for the unexpected consequences of living. There is just too much uncertainty in our lives not to have money set aside for the future.
Whether for a rainy day fund, big ticket purchase, fun item, or just a feeling of added security, saving is important. If for no other reason, think of spending less than you earn and saving as an esteem builder. Money we’ve saved boosts our confidence. It sets us on a course to achieve our personal goals and realize our dreams.
You can begin saving with change in a jar or old fashioned piggy bank. You can start with any amount, even if it’s just $10 in an envelop in a bureau drawer. The minute you start you’ll personally feel better, so here are five steps to get your plan into action.
First and foremost make this personal. Saving is a personal benefit to you. It’s you being good to yourself. It’s you paying yourself first before any other money is spent. It’s you rewarding yourself first for working and doing a good job.
Second, begin by developing a monthly budget and sticking to it. Keeping to a budget doesn’t have to be cumbersome. It allows you to put dollars into savings as your first act each month, and this is goal one!
Keeping a good budget can be a task as simple as recording income and weekly expenses in a notebook. There are also a number of easy to use online budget programs that will work on a desktop computer, android device or smart phone. A web search will give you an opportunity to explore some of these options and decide if this is a good approach for your savings plan. The important point is to make a budget and follow it. This frees up dollars to build your savings.
Step three is not be too concerned with bank or credit union interest rates. Low or high, passbook savings rates are secondary to you building your savings habit. This isn’t to suggest you take the lowest rate available. It just means the interest earned on a savings account is not the goal. Rates vary over time and are beyond your control, so it’s more important to build your savings in a place most handy to you.
Next, set a reasonable amount of money to put aside when you first begin. Like many people, I’ve had my issues with weight maintenance and general fitness during my life. I’ve hit the exercise routine really hard at times and watched my diet, but only to eventually fall of the wagon. From years experience, I learned that a realistic fitness goal would be something I would stay with, versus trying to reach a goal set too high.
Saving money works very much the same. Start with a dollar amount you absolutely know you can put aside each month. You are more likely to build a lifelong habit if you start with an achievable goal and have quick success. Over time you can make tweaks and changes, but you need to have the habit ingrained in your monthly routine first.
The final action is to increase your savings goal as you get your monthly budget under control. Nothing adds “found” money to our lives as much as keeping track of expenses. When your income changes you need to make sure that your first important action is increasing the savings budget.
As your venture progresses, you’ll watch your money grow. This is where the interest rate is important. You will have an unseen partner called interest rate helping you build wealth. If you save $50 per month at 1% interest for 25 years you will have $15,753.22, and the same 1% for 25 years saving $200 per month grows to $68,461.52. This power of compounding interest is considered the greatest wealth builder by financial experts worldwide.
Starting a savings plan feels great and builds your personal safety net. It puts the power of wealth building under your control, where it deserves to be. Start your own savings plan and you will be proud that you did.