Having an emergency fund, savings account for your future goals, and a proper retirement plan are all important things to establish early in life so that you can be free from financial burden. Although ups and downs are inevitable, following some simple savings tips can set you up for financial freedom later in life.
Having a budget does not mean you have to be restrictive with your spending, rather you need to have a plan for your money and where each dollar will go. This prevents mindless spending while allowing you to make decisions based on your financial goals. For example, the average person spends $1,100 per year on coffee – that’s a significant amount that could have been saved simply by making your brew at home. If you have a budget and take time to track all your spending, including all those little things that can add up quickly, you will easily be able to spot where your most wasteful spending is and what you can eliminate. Put that money in your savings account instead or use it to pay off any debt you might have.
Review Your Fixed Expenses
Monthly bills, like cable TV in particular, can be negotiated or cut out altogether. Review your membership and subscription fees and see where you can cut back. For example, do you really go to the gym enough to justify the monthly membership fee? Maybe you should consider ways to work out at home. Do you need commercial-free music streaming, or can you save $10 each month? Other bills you may want to reconsider could be a gardening service, magazine subscriptions, Amazon Prime, Netflix, or other streaming services.
Long-term savings should not be held in a typical savings account. Be sure to speak with a financial advisor about bonds, index funds, and high yield accounts. If you’re selling your home and expect a reasonable profit, it’s smart to invest a large portion of that before making the down payment on a new home. Be sure you use a home sale proceeds calculator to determine how much you might be able to make when it sells. It’s also a smart idea to invest tax refunds, annual bonuses, and any unexpected type of windfall as it’s all extra income that hasn’t been calculated into your budget.
Maximize Your 401k Contributions
Many people work for companies that offer to match a percentage of your contribution to a 401k. That’s free money so if you aren’t taking advantage of it now, that’s something you’ll want to do ASAP. If your employer matches up to six percent, be sure you are contributing at least six percent of your income, you don’t want to miss any of those extra funds you could be getting. If you don’t have a 401k or your employer doesn’t offer one, you may want to set up an Individual Retirement Account (IRA).