Make saving a New Year’s Resolution
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For many people the New Year is an exciting time to start new things or to make improvements in certain areas of their lives. So why not add “saving” to your list? Savings can help with financial emergencies, help us achieve financial goals (i.e. new boots, car, house, etc.) and help us to secure financial stability in later life. While many consumers know the value of a savings account, many don’t have one and aren’t sure how to start one. So let’s break it down into simple steps from Michigan State University Extension.
How to start saving:
- Create a budget or spending plan, which includes “saving”. (It is recommended that people save 10% of their income each paycheck). There are many tools that can help with creating a budget such as: pre made forms/templates, computer programs, phone apps, spreadsheets, etc. Use whatever works for you. What is importance about a budget is that it should include: all sources of income (including assistance), all expenses (including fixed and flexible expenses) and regular savings. Savings plus expenses should be equal to income and if it isn’t, than consider increasing income, decreasing spending or both.
- Remember that small changes can add up to big savings over time. Track spending and think about if purchases are actual needs or wants. Reducing or eliminating unnecessary spending can create new opportunities for saving.
Goal setting:
- Create an emergency savings first. This should equal three to six months of expenses.
- Once an emergency savings is in place, than plan and write out your financial goals. Financial goals can be placed into three categories: short, medium and long term goals. Short term goals target 1-2 years, medium goals 2-5 years and long term goals 5+ years. Financial goals should be SMART goals: i.e. Specific, Measurable, Attainable, Realistic and Time Sensitive. Following these steps helps to increase the success of financial goals.
Other tips:
- Mymoney.gov suggests that emergency savings accounts should be kept in an insured bank or credit union.
- Pay yourself first! Automatic transfers or direct deposits into a savings account can help with your savings plan.
- Track your savings. Research has shown that people who monitor their savings tend to save more since they have it on their minds.
- If you are considering investing be sure to meet with a qualified professional, request a copy of their services and check their credentials. For more information visit MyMoney.gov.
If you’re wondering about your financial health, take a financial health survey from MI Money Health to get your financial health score! It's confidential and your answers never connect back to your name. This survey can help you evaluate your current financial situation, provide ideas on how you may improve your financial health, and connect you to resources in your local community.
