Learning to Save
8 Simple Ways to Break Your Spending Habits, and Make Them Into Savings Habits
Dream First Bank believes there are 8 simple ways to break your spending habits and make them into savings habits, and that is:
- Record your expenses. The first step to saving your money is to understand how much money you spend. Tracking your expenses will help you organize your transactions and see what you're spending money on according to your needs and your wants. Needs are things like gas, mortgage loans, groceries, and so on. Wants are everything you buy but do not necessarily need. Consider cutting back your expenses and putting more in your savings account.
- Make a budget. Once you understand your expenses, create a budget that measures your expenses up to your income. This will help you understand how much you are overspending, as well as how much you are spending a month.
- Plan to save. Now that you have a budget, it makes saving money much easier. Create a savings account where you can put away 10-15 % of your income. It is important to make sure you can save at least 10% of your income, and if you can’t, that means you MUST cut back on your spending.
- Choose what to save. When saving money, one of the best ways to motivate savings habits is to create a goal. Think about a house you want to buy or a vacation you want to go on. Then, calculate how long it will take you to save that money in the short term (1-3 years for vacation, new car, emergencies) and the long term (4+ years for retirement, child's college fund, new house, etc.).
- Decide on your priorities. Decide how you want to spend your money and how you are going to save it. Decide on your long-term goals and your short-term goals to help you save.
- Pick the right tools. For short-term goals, consider using FDIC-insured deposit accounts, savings accounts, or Certificates of deposit. For long-term goals, consider using FDIC-insured IRA, stocks, or mutual funds.
- Make saving automatic. Automate your transfers to make sure a set amount goes into your checking and your savings accounts each month.
- Watch your money grow. Every month, check where your savings account is and make a note of where you want it to be. Check your personal savings account and make sure you are on the right track to meet your financial goals. If you're not, make some changes and try to reach your goals.