No matter your financial goal – debt repayment, emergency savings plans or retirement – the right strategies can make these goals much simpler to reach. Uncover forgotten money management techniques that enabled the author to save and invest enough for retirement in his early 40s; alternative ways of protecting nest eggs against long-term care expenses; and much more!
1. Use a Budget
Budgeting can help bring your financial actions in line with your goals, and although many may see budgeting as restrictive or restricting, that couldn’t be further from the truth. A budget shouldn’t limit you from doing what you want.
An easy budget involves identifying your projected income and subtracting expected expenses to discover how much is left over for discretionary spending. You can do this with pen and paper, an app on your phone, or using an Excel budget spreadsheet.
Try creating a zero-based budget or the envelope method of budgeting, whereby each dollar is assigned to an expense category such as bills you owe or credit card debt payments. Only spend what fits within that envelope for that category – any remaining funds must come from another area and reduce spending accordingly.
2. Set Savings Goals
No matter your financial goals–be they vacation, down payment on a home, retirement–the key to achieving them is tracking spending and setting savings goals. Reviewing bank and credit card statements can help identify areas where savings opportunities lie.
One effective strategy to follow when budgeting expenses is the 50/30/20 rule, which suggests allocating expenses among needs, wants, and savings. While this serves as an excellent starting point, you should adapt it according to your own specific circumstances.
Similarly, if you need your money in three or fewer years, investing in more secure assets like CDs and savings accounts might make sense. Conversely, investing in stocks might make more sense when planning to retire in 10 or more years.
3. Make a Spending Plan
Take an honest, realistic inventory of your expenses and needs. Begin with expenses you must spend money on, such as rent or mortgage payments, utilities payments, food expenses and debt repayment. Once this list has been created, move onto variable expenses that might be easier to control — such as that new handbag or car purchase, gym membership costs, movie ticket purchases or streaming subscription fees.
Rely on receipts, bank statements or check register to keep track of each expenditure and total them by month. Compare that total with your income to determine if you are overspending; if so, look for ways to cut expenses that may be overspent upon. Ideally, save part of each monthly paycheck towards short- and long-term goals.
4. Create a Savings Vehicle
Once your spending plan is established, the next step should be creating a savings vehicle. This might involve opening an automatic savings checking account, high yield savings/money market account or even a certificate of deposit (CD).
Savings vehicles vary in terms of timelines and goals; choose one that works for yours. For instance, an emergency fund might work best when kept in an easy access savings account that won’t yield as much interest.
However, if your debt carries high interest rates, paying it down might be more advantageous as this will free up money to invest and provide greater returns in the long run.
5. Increase Your Income
Though learning new money management strategies is always valuable, some time-tested tips remain essential – particularly for anyone living paycheck to paycheck or experiencing overspending issues, or simply hoping to ensure they have enough savings available in case unexpected expenses arise.
Establish multiple savings accounts at your bank to allocate funds for specific purposes. This will allow you to set aside specific amounts for bills, recurring expenses (such as streaming services and mobile apps subscription fees), as well as “nice-to-haves” like dining out.
As well as finding ways to increase your income through side gigs or advocating for raises at work, consider exploring ways you could boost it further – even just a modest increase could make a substantial difference when it comes to reaching long-term financial goals.