Having financial goals and saving money can seem like two opposing goals, but it's important to remember that one doesn't have to come at the expense of the other. Here are five savings strategies you can use to help you reach your goals without feeling like you're sacrificing too much of your hard-earned cash on savings and budgeting. Remember, saving money doesn't have to be painful! On the contrary, it can be pretty fun if you do it correctly.
1) Divide & Conquer
One way to make saving easier is to divide your savings into different accounts for various goals. This can help keep you motivated (why save money for retirement if you don't know what it's for?) while keeping your money safe. For instance, you could create an account for your emergency fund and one dedicated to home improvements. The key is to ensure each of your savings' accounts has its own goal so that every dollar goes toward its intended purpose.
Also, consider setting up sub-accounts within your main savings accounts—we recommend$10–20 per sub-account. That way, you'll be less tempted to spend those funds after seeing them on your statement and will instead force yourself to move them over before using them.
2) Automate Your Savings
To make saving money easy, automate your savings. Create a separate savings account and have money taken directly from your paycheck and deposited into that account every payday.
Then, you won't even have to think about transferring it manually. This will also help increase your awareness of how much you're saving: when it's not in your checking account, its absence may be more noticeable—and help you appreciate your growing balance even more. It'll become second nature before you know it. Finally, make saving money fun. Saving money doesn't have to be dull. Making your goals more exciting can help motivate you to achieve them!
3) Set Time-Based Goals
The more specific your goals are, the easier it will be for you to save money toward them. So, if a goal isn't significant enough to establish a timeline, then perhaps it's not as important as you think. If that's the case, don't worry about saving extra money for that goal until there is one that deserves your time and attention.
Set milestone-based goals: intermediate steps between where you are now and where you want to end up. For example, if your dream retirement scenario includes living on a lake in Florida with only an occasional trip back home to visit friends and family in New York City, setting up milestones can help keep you on track. Say you need $500,000 saved for retirement.
Your first goal could be to save $100,000 by the age of 40, then $250,000 by the age of 50, and so on. This allows you to set smaller goals within a larger framework—which means less stress from having such a large number looming over your head all at once!
4) Create Short-Term Financial Milestones
Maybe you need an emergency fund. Maybe you want to save for a down payment. Perhaps you're saving for a big trip that's six months away. Whatever your goal, it can be easy to lose sight of your financial goals milestones as things start getting busy, especially if you're not used to regularly budgeting and/or saving money. But setting up short-term goals will help you see how much progress you've made towards reaching your end game.
For example, if you have $1,000 in savings right now and want to have $2,000 by next month, that gives you something tangible to work towards (and helps keep those pesky credit card bills at bay). By establishing benchmarks, you'll also better understand where your money is going every month, which can go a long way toward helping you cut back on frivolous spending.
5) Prioritize High-Interest Debt
When you have debt, the money you pay each month toward that debt is typically not invested. High-interest rates on credit cards and other loans mean more of your paycheck gets eaten up by interest—money you could save instead. It's best to attack your high-interest debts first.
Figure out which one has the highest interest rate, and then make a plan to pay it off quickly. With many companies, it's possible to negotiate a lower interest rate. This will help you save money in the long run.
An excellent way to prioritize high-interest debt is to focus on paying off small amounts at a time rather than considering the total amount you owe. Start with an amount that won't overwhelm you (such as $10 per week) and continue to dwindle down your balance until it is paid off completely. If you don't know where to start, consider consolidating your debt. Some banks offer low-rate personal loans for borrowers who are already in debt. If you can get their interest rate down below 10 percent, you may be able to pay off their old balances faster while still saving on monthly payments. And if you can get their interest rate down even further, you
might even want to apply for a home equity loan or line of credit—but only if they're planning on using that extra cash as savings.
Bottom Line
The bottom line is that having a savings account is integral to making your financial goals a reality. However, not all savings accounts are created equal. There are various factors to consider when opening an account, including fees and interest rates. One factor you should never neglect when opening a savings account is liquidity. Liquidity refers to how quickly and easily assets can be sold or converted into cash in times of need.
In general, liquid investments (like money market funds) offer higher returns than non-liquid investments (like stocks), but they also come with greater risk; if you need to access your money quickly, it might not be there for you. If you have any questions about savings strategies that will help make reaching your financial goals easier, please feel free to ask we love hearing from our readers!
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