The start of the new year is a time when many of us look to improve our lives by making resolutions. Along with health-related resolutions, new years goals that relate to personal finances are particularly common. Two of the most important financial goals are to pay down debt and to save more.
The benefits of paying down your debt are immediately apparent, but sometimes the benefits of building up your savings sometimes aren’t clear until a number of years down the road. This means that sometimes personal savings gets neglected.
With that in mind, here are some tips for jump starting your savings in the new year.
Set a SMART Goal. Most people would like to save more as part of their budgets. But “saving more” is vague, so it’s tough to know if you’re doing enough. Instead, come up with a savings goal using the “SMART” criteria. This means that your goal is Specific, Measurable, Attainable, Relevant, and Time-bound. When your savings goals are clear, you’ll have a better chance of achieving them.
Automate Your Saving. One reason that some people find it hard to succeed in their savings goals is that they give themselves the opportunity to fail. Automate the process through automatic payroll deductions or automated account transfers in order to jump start your savings. Read about how to do this in my pay yourself first article.
Get a Quick Victory. Success breeds success, so if you’ve experienced difficulties in the past with meeting your savings goals, you may wish to choose an initial savings goal that you’re confident you can meet quickly. You can then build on this achievement and establish new goals that gradually challenge you to save even more to reach each successive goal.
Combine Your Goals. Consider choosing New Year’s resolutions that can support one another, and thereby compound the benefits you receive. For example, if one of your goals for the coming year is to lose weight, then you might identify an area of your discretionary spending that contributes to your weight – such as a daily latte or snacking. By setting a goal of reducing or cutting out that caloric consumption you’ll free up cash that you can immediately put toward meeting your savings goal.
Set and Honor Your Budget. In order to stick to a savings plan, you actually need to have a plan. Make sure that as you begin to consider your finances for the coming year, you build your new savings rate into your larger budget. When saving is a budget line item that you have to meet, along with paying your mortgage and utilities, you’re more likely to do so.
Consider Refinancing. Depending on your individual circumstances, you may be able to free up some additional cash for saving by refinancing your home or automobile loan to a lower rate. Just be sure that if you choose this strategy you use the amount you save in interest payments each month to boost your savings.
Finally, don’t limit yourself to developing a new financial practice strictly as a New Year’s resolution. Once you’ve decided to jump start your savings, get started today.
Tags: Banking Advice, emergency fund, saving money, savings account