One of the only confusing things about saving money is figuring out what in the world you actually need to save for. How do you know how much money you need and what do you do with it? The answer to these questions will obviously be a bit different for every person, but check out a few of these tips and things to consider when thinking about putting money aside for later use…
What should you be saving for? The most important chunk of what you’re saving should go towards an emergency fund (generally 3 – 6 months’ worth of expenses) for anything that could pop up unexpectedly, such as job loss, a death in the family, home repairs, etc. But what about everything else? Think about long-term goals that are important to you that might alter your budget in the future – buying a house or a car, starting a family, or going on vacation. I also like to think in terms of things that aren’t paid for frequently, but still need to be taken care of over time – car maintenance, self-care (i.e. haircuts, clothing), and special events or vacations. Divide these goals up so you can contribute money to each and you’ll be better able to monitor your savings progress!
How much can you afford to save? This is one of the ways that budgeting comes in very handy! I base how much I save off of what is left after all of my monthly expenses have been taken care of, and how many things I’d like to save for. I divide my total savings amount up according to the importance of all of my goals (i.e. I contribute more to our home and family funds because I’m likely to need that money sooner rather than later but less to my haircut fund because I only have that done every few months and it’s less expensive). Another thought to keep in mind is how much you’d like to save in total for each goal, and how long you’d like to take to reach that number.
Where should you keep it? It’s best to set up a savings account that’s separate from your checking account so you’re not tempted to spend it. I like to set up my accounts to automatically withdraw what I’d like to save directly from my paychecks so I never even see it. You can’t spend money you don’t have! If you’re looking to save a larger sum of money you already have for a later date, you can even consider options like CDs, which can guarantee you won’t spend it since you’re not allowed to withdraw funds until they mature.
What are you saving up for? Do you have any suggestions for being a better saver?
