Many people put saving money at or near the top of their list of financial goals. Still, saving money can be tough for people at all income levels. If you've been working toward building a bigger savings, use these tips to help reach your goal.
Spend less than you earn.
Perhaps the most important thing you can do to build your savings is to reduce your spending. Creating a gap between your income and your spending frees up more money for you to save. Cutting back your spending is sometimes easier said than done. Constantly review your monthly expenses, looking for places where you can cut back and save more money.
Set a goal.
Working toward a savings goal can help you stay motivated to save money rather than spend it. Common savings goal include building an emergency fund, saving a home down payment, funding a vacation next year, saving for retirement, or just having more money in a savings account. Make sure your savings goal is realistic (based on your income and expenses) and choose a date to meet your goal. For example, you might set a goal to have $4,000 in your savings account in 12 months. With a fixed goal in mind, you know just how much you need to save each month to reach it and you can track your progress toward meeting that goal.
Set smaller milestones.
It can take several months or even years to finally reach your savings goal depending on the amount you’ve decided to save and the amount you're able to contribute each month. Along the way, you can celebrate smaller successes, or milestones. For example, if you’ve set a $4,000 savings goal, you may have milestones for each $1,000 you save. Reaching milestones shows that you’re making progress and can keep you motivated to continue working towards your goal.
Pay yourself first.
Many people don't put money in saving until the end of the month when they've paid all the bills and have done all the necessary spending. However, the most effective way to reach a savings goal is to put your money in savings first, before you pay any other bills. Then, you fit your other expenses into what’s left after you save.
Make it automatic.
Most banks now give the option of making recurring automatic transfers into another account. You can use this option to automate your savings. Just set the transfer amount and your savings grows with almost no effort on your part. Once you've set up the automatic transfer you only have to make sure there's enough money in your account to cover the transfer and make sure you're leaving enough money to pay the expenses you have left.
Make your savings hard-to-reach.
When parents want to keep their kids of the cookie jar, they store the jar out of sight and out of reach. You may have to do the same thing with your savings to keep yourself from dipping into it. For example, it may be a bad idea to keep your savings in an account linked to your main checking account. Instead, consider putting your savings in a bank that you can’t access easily - out of sight and out of reach. You might even invest in a certificate of deposit, or CD, which will lock your money away for a period of time.