According to statistics, 50% of Americans do not have emergency savings. There are several possible reasons behind this, including, not knowing how or where to save and simply not having enough income to save. Whatever your barriers are, the tips below can help you overcome them so you can start saving money today.
1. Settle your debt.
With debt, it will be hard to save anything. Pay your debt first so you can be on your way to financial stability. The moment you clear your debt, all that money can be applied to savings, instead of interest. In fact, you will be in a position to earn interest!
2. Build your emergency fund.
You can draw from this money if an unexpected bill comes up, instead of creating debt. Ideally, you will save up to six month’s worth of expenses. Of course, you must start with putting away enough for a month and keep adding to your emergency reserves.
3. Separate short- and long-term savings.
Short-term savings can go in any regular savings account while long-term savings can be deposited to a money market account or certificate of deposit. This gives you more earning potential, plus protects you from the temptation of withdrawing your money.
4. Invest in a retirement plan.
Max your 401k contributions, especially if your company matches it. You can also contribute to a traditional IRA or Roth IRA depending on your needs.
5. Invest in a brokerage account.
This is the next step after you have maximized your tax-advantaged retirement accounts. With a brokerage account, you can invest in stocks, mutual funds, or bonds. Unlike your traditional retirement accounts, investing in brokerage accounts have no tax benefits but are useful in creating more savings.
Ultimately, it does not matter how you start saving as long as you pick one to take care of your finances. Even the tiniest amount that you save every month will make a difference for your future. Think of saving money as a marathon rather than a sprint. If you are consistent with your habits, you will reach your financial goals eventually.