By: Glenda Wentworth, Family & Consumer Science Extension Agent, Eagle County
A key principle to building wealth is saving money. Studies show that people who develop a habit of saving regularly, even small amounts are successful. Setting aside money helps to form a savings habit. This is called “Paying Yourself First”. Paying yourself first simply means setting aside money before there is a temptation to spend it. Arrange with your financial institution to automatically transfer a certain amount from each paycheck to savings. Over time, it will add up and you will be building wealth.
Here are some strategies to take for successful savings.
Set Yearly Money Goals
Determine your financial goals, they provide focus and purpose for what you value in life. Goals help you use your money to do the things that are important to you and your family. Saving money, improving your financial health, and building wealth starts by setting a goal and making a plan to reach that goal. Goals must be clear, precise, consistent and measurable.
With your family, figure out what your goals are? Do you want to set up an emergency cash fund, get out of debt, make a down payment on a car or home or put away money for college or retirement? Consider keeping your list of goals short. It will be easier to make progress towards them. With fewer goals, you will more likely keep “on track” toward meeting them.
Whatever your goal is, write it down and figure out how to work towards it. First you need to establish a time frame to enable you to calculate the amount of savings you need weekly or monthly to reach that goal. Be consistent with saving money for your goals, treat it like an expense. Make it a priority; with regular savings, even small amounts can add up quickly.
Make Savings Automatic
People who save are more likely to be satisfied with their personal finances than those who spend more than their income. Finding money to put into savings can seem difficult. However, there are some strategies that can make it easier. The easiest and most effective way to save is automatically. Deposit a portion of each paycheck into a savings or investment account. By saving automatically, what you don’t see you won’t miss. Stick to your plan, once you start saving, it gets easier and easier and before you know it, you’re on your way to making your dreams a reality.
Take Control of Your Spending
Families who have a spending plan say it is an effective tool to help them get a grip on their money. A spending plan can help families spend hard-earned dollars more effectively, live within their income, reduce the need for consumer credit, save for things wanted and develop skills in financial management.
Tracking expenses is an essential money management skill. Manage your spending by tracking each expenditure and recording your expenses. Save all your receipts or keep track of how much you spend each day. It helps you know where your money is going. It also helps identify spending habits that can be revised and allocated towards your goals.
Commit to tracking your expenses for two to three months to get an average of how much you spend monthly. There are many ways to track expenses, whatever method you choose, stick to it.
Practice Delayed Gratification
Resist overspending; live a frugal lifestyle, avoid impulse buying and trim spending. Before making a purchase (no matter how small or large) consider these questions:
- Do I really want and need this?
- Can I afford this purchase?
- Is it even good for me or my family?
- What would happen if I could not have it?
- Am I buying this because it is on sale?
- Am I buying this because I am depressed?
- Is there an alternative I can accept?
- What must I give up to have it?
- Is there a better way to use this money?
Make a commitment to yourself and your family to improve your financial health and build wealth in 2018. In just a short time, you’ll see a big difference in your financial well-being. You just might be surprised about how rewarding it is.