If you’re anything like me, you overspent (again) during the holiday season and vowed to get your finances back on track as one of your 2012 resolutions. Resolving to save more money is one of the most common resolutions. Now that January’s passed, and some of us are already losing motivation to stick with our savings resolutions. Here are a few easy steps to get you back on track with a savings plan.
#1 Determine a clear savings goal.
Simply setting a goal to save up more money is a great start, but it probably isn’t going to keep you motivated for long. Start out by identifying your specific savings goals. For what purposes do you want to save money, and how much money do you ultimately want to save? Whether it’s a long-term goal like retirement or saving up for a weekend getaway, you’ll want to figure out why you’re saving so you have something to keep in mind when you’re tempted to dip into your savings account.
#2 Figure out the best way to reach your goal.
Depending on the reason you’re saving, your approach to setting aside money can vary quite a bit. If you’re thinking ahead toward retirement, a Traditional or Roth Individual Retirement Account (IRA) could be great options, but that type of account won’t make sense if you’re saving for something like the 2012 holiday season.
A couple of things you’ll want to consider at this point are:
1) How long or short-term are your savings goals?
2) Are you looking for a secure savings option that might earn lower interest or dividends but is completely insured, or would you rather gamble on setting aside your money in an investment that could potentially earn more interest but could also suffer major losses?
Once you’ve got a good idea of how you’d answer both questions, you can figure out the best savings approach for you. If you’re uncertain as to what makes the most sense for your specific goals, I highly recommend contacting your financial institution or a financial advisor for guidance.
#3 Know what you want in a savings account.
If you’re just starting to establish your savings and want a secure option, look into basic savings accounts, certificates, money market accounts or IRAs that are insured by the NCUA or FDIC. Contact your financial institution to see if they offer savings options with low minimum balance requirements so you can start setting aside money right away. If you’re interested in higher-risk options, it’s probably best to meet with an investment advisor, especially considering how volatile the stock market is right now.
No matter what type of account you’re considering, be sure to ask about its terms and conditions. What’s the interest or dividend rate, and is it fixed or variable? Does the account allow additional deposits? If so, how many deposits are allowed per year? Are my funds insured? How often can I withdraw money from the account, and is there a penalty for doing so? What other fees are associated with this account? There are many savings account options out there, so you’re sure to find an option that will work for you.
#4 Make it easy.
When beginning a new savings plan, many people find it helpful to start small and use a consistent approach to saving. One easy way to start is to contact your financial institution to set up a savings account designated for a specific purpose, such as an emergency fund. Next, establish an automatic transfer that deposits a set amount of money to this account on the same day every month or on each payday. Beginning with an automatic transfer for as little as one percent of your paycheck or $25-$50 every month is a great initial goal. Try to approach your savings plans like you would pay your bills; treat saving money as if it’s a mandatory part of your monthly budget.
#5 Stick with the plan.
Easier said than done, I know, but believe me when I say establishing and reaching savings goals are things you can definitely accomplish in 2012. If you’re struggling to create a savings plan or can’t seem to stick with your plan, don’t hesitate to seek professional assistance. Take advantage of the countless free and inexpensive resources available online, consider setting up an appointment with a financial advisor to review your goals or contact your financial institution for additional advice.
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