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Sometimes the hardest thing about saving money is just getting started. Finding easy ways to save a lot of money and how to use your savings to meet your monetary goals can be difficult. This bit-by-bit guide to money-saving habits will help you develop a practical savings setup.
1. Record Your Expenses
The first step to saving money is knowing how much you spend. Keep track of all your spending – it shows every coffee, newspaper and snack you buy. Ideally, you’ll be able to account for every penny. Once you have your information, organize the numbers by categories like gas, groceries and mortgage, and add up each amount. Consider using your credit card or bank statement to help you with this. If you bank online, you’ll be able to filter your statements to easily break down your expenses.
2. Create a budget
Once you have a plan for what you will spend over the course of a month, you can begin to build your recorded expenses into a tentative budget. Your budget should outline how your expenses contribute to your income – so that you can determine your spending and limit overspending. In addition to your monthly expenses, be sure to consider expenses that occur frequently but are not monthly, such as car maintenance. Find out more about budgeting.
3. Money saving plan
Now that you have created a budget, create a savings category within it. Try to keep 10-15% of your income as savings. If your expenses are so high that you can’t save that much, it’s time to cut back. To do this, identify non-essential items that you will spend less on, such as entertainment and eating out. We’ve put together ideas to save cash every day as well as cut down on your fixed monthly expenses.
Tip: Considering saving for everyday expenses, such as groceries, can be a good way to reinforce good savings habits.
4. Choose something to save.
One of the simplest ways to save a lot of money is to set goals. Start by thinking about what you might need to save a lot of – from a down payment for a house to a vacation – then figure out how long it will take you to save for it. If you’d like help setting a deadline, use Bank of America’s savings goal calculator ( https://www.bankofamerica.com/deposits/Savings/Savings-goal-calculator/ ,
Here are some examples of short and long term goals:
short term (1-3 years)
– Emergency fund (3-9 months of living expenses, just in case)
– Holiday
Down payment for the car
long term (4+ years)
– Retirement*
– Your child’s education*
Down payment for a home or remodeling project
*If you’re saving for retirement or your child’s education, consider putting that money into an investment account. While investments run with risk and can lose money, they also offer a chance for compounded returns if you plan long enough for an event.
5. Set Your Priorities
After your expenses and income, your goals probably have the most significant impact on how you save money. Be sure to remember long-term goals—it is essential that planning for retirement does not take a backseat to short-term needs. Prioritizing goals will give you a clear idea of where to start saving. For example, if you find out that you plan to replace your car in the near future, you can start putting money away for one.
6. Choose the Right Equipment
If you are saving for short term goals
– Regular Savings Account
– High-yield savings account, which typically has a higher interest rate than a regular savings account
– Bank Money Market Savings Account, which has a variable interest rate that will grow as your savings grow
For long term goals consider:
Securities such as stocks or mutual funds. These investment products are available through investment accounts with a dealer. Keep in mind that securities, such as stocks and mutual funds, are not insured by a corporation, are not bank deposits or alternative obligations and are not tied to the bank, and are subject to investment risks, including possible loss of the original investment.
7. Automate Savings
Almost all banks offer automatic transfers between your checking and savings accounts. You’ll be able to choose when, how much and where to transfer the cash, or maybe split your direct deposit between your checking and savings accounts. Automatic transfers are a great way to save cash because you don’t have to think about it and it reduces the temptation to spend money in general.
8. Watch your savings grow
Check your progress each month. Not only will this help you stick to your personal savings plan, but it will also help you identify and fix issues quickly. These simple ways to save a ton of money may inspire you to save more and meet your goals faster.
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