- Keep a record of your expenses.
Before you do anything else, figure out how much money you’ve spent in the last few months. No, it’s not nice, but you need to see it to figure out where your problems are.
Rather then sifting through your bank statements, use the Empower app to do it for you.
Empower can assist you in determining how you spend your money and creating a budgeting strategy to help you stay on track.
It will keep track of your spending whether you use its fee-free banking account or if you link it to one you already have. It will also classify your expenditures so that you can identify where you’re going overboard.
- Set short-term and long-term savings objectives.
Now that you’ve gotten a sense of your spending habits, it’s time to set some short-term and long-term savings goals.
Here’s the distinction:
When you need to save money quickly, choose a short-term savings goal. Perhaps you’re saving up for a plane ticket home. You could also start an emergency fund and set a three-month goal of $500.
If you have a more ambitious objective, make a long-term savings strategy a priority. Saving for a down payment on a house or a college fund for the kids are two examples. Consider retirement if you’re thinking long term.
It is critical to have both goals in place so that you may enjoy the present while planning for the future.
- Make a Financial Plan
Personal finance 101: Look at your spending with your savings goals in mind. Establish some boundaries for yourself.
What is the key? Keep your expectations in check. Don’t make your new food budget $200 if you spend $500 a month on groceries. That will necessitate a complete lifestyle change.
If you’re not sure where to begin, try one of these two popular approaches:
*The 50/20/30 budgeting method divides your expenses into percentages: 50% for living, 20% for financial goals, and 30% for personal expenditures. This plan is popular because it includes some personal spending flexibility.
*The 60/20/20 budgeting method divides your expenses into percentages as well. In this case, 60% of your income goes toward lifestyle expenses (food, water, shelter — your necessities), 20% goes toward discretionary spending (fun money), and 20% goes toward savings. This plan is recommended by financial advisors because it prioritizes your needs over your wants.
Creating and adhering to a budget takes practice, so be patient with yourself.
- Be smart about where you put your money
What will you do with the money you’ve saved? Consider several choices that will generate interest or returns so that your money does not sit idle.
Here are a few suggestions:
* You can conveniently access your funds while simultaneously collecting income with a high-yield savings account. I recommend looking for an account that pays at least 2% annual percentage yield. It’s ideal for a rainy day money or a vacation fund.
*A certificate of deposit (CD) pays a greater rate of interest. CDs, on the other hand, have set maturity dates. That implies that if you put money into a five-year CD, you can’t get it out early or you’ll be penalized. You can’t put money on a CD either.
*Stocks and bonds are two common investment options. Both are excellent for long-term objectives, such as retirement savings. Stocks are riskier, and you might lose money if you invest in them. However, if you’re prepared to ride out the market’s ups and downs over time, it may be worthwhile. Bonds have a reduced risk profile, but they also have smaller returns. As a general rule, the younger you are, the greater the amount of danger you can take.
