How to Build Your Savings, Part 2

In Part 1 of How to Build Your Savings, I stressed the importance of choosing your savings goals, whether you are saving for emergencies, periodic expenses, major purchases, fun stuff or something else. For Part 2, I have five strategies for reaching your goal(s).

Now that you’ve set your goals, take action!

• Set a Budget: Building a budget is the most critical aspect of executing your savings plan. Capture all fixed, periodic and other expenses like food, entertainment or household items. View our list of resources to help you track and calculate your spending. As you do this, set monthly targets. For example, set a limit of $500 a month on groceries, and try to stay under that amount.
• Factor savings into your budget: After you put in all your expenses, factor in amounts you can save, based on your goals. Make sure these sums are reasonable, ones you can stick to each month. Then treat these savings amounts like a bill.
• Cut excess spending as needed: One of the biggest barriers to a successful savings plan is overspending. Determine which areas of your budget you can cut or eliminate. Though this may reduce some of the fun expenses, you be more successful in reaching your goals and increase the amount you can save toward those goals. View our list of ways to cut expenses in 11 major areas of your life.
• Find that extra money for savings, and keep yourself from spending it: My colleague Elaina Johannessen wrote a great blog post about emergency savings a few months ago, in which she shared her strategies on how to fund her emergency savings account and ensure she doesn’t have easy access to that account.
• Select the right type of savings tool: The most common savings tools are a standard savings account and a certificate of deposit (CD). Each has its advantages and disadvantages. The savings account gives you easier access to your funds but with a lower interest rate. The CD gives you a higher interest rate, but you won’t be able to access the money until the CD’s maturity date – unless you want to pay the penalties for early withdrawal.

For infrequent expenses, consider setting up multiple savings accounts: one for emergencies, one for periodic savings, and a third for other savings goals (major purchases, fun stuff, etc.).

The best way to save money is to simply get started.  You will reach your savings goals more quickly with a plan in place. If you are having trouble reaching your goals, we can help! Call LSS Financial Counseling at 888.577.2227 for your free, confidential financial counseling session, or get started online. Our counselors will work with you to create a realistic budget and action plan to help you take back control of your finances.

Author Ray McCoy is a Certified Financial Counselor with LSS Financial Counseling.