Simple Strategies for Building your Savings

Most people know the importance of saving money, but many neglect to make regular savings a budgetary priority. These folks wind up living paycheck to paycheck as a result. In a recent study done by the National Foundation for Credit Counseling, and cited by MSN Money, only 36 percent of respondents had an emergency savings fund they could tap into in the event of a car break down, unexpected medical bill or other short-term financial mishap. However, saving money isn’t as difficult as you might think. There are five simple strategies you can use to build your savings right now, so that you aren’t left in the financial lurch when an emergency arises.

-Plan and set goals-

In order to get (and stay) on the financial straight and narrow, you need to have a financial goal. Start with a fund of $1,000, but draft a plan to build your savings to equal at least six months worth of your gross (before tax) salary.

Write your goals down and weigh these goals against your budget. Begin cutting things from your budget that are preventing you from saving the maximum amount you could be saving each month. Your bumps in the road could be an over the top cable bill, an expensive cell phone plan, credit card interest or a daily Starbucks habit. Figure out what you can live without and re-allocate that money to your savings sooner than later. Even saving $5 a day means saving $1,825 a year.

 -Determine an allotment-

Most financial experts recommend between 10 to 15 percent of your gross income each month. Make sure your budget reflects that amount. Write your savings allotment into your budget each payday. Automate your paycheck to savings withdrawal to your savings account every pay cycle so that you can ensure you are always first. If you don’t see the money in your checking account to begin with, you are less likely to spend it.

 -Cut the plastic-

Credit cards are budget killers, especially if you are only making the minimum monthly payments each month. Pay off your credit card balances and redirect the minimum monthly payment you were making (with interest) to your savings. Now, you are earning the interest payment instead of the bank.

Above all else, avoid falling into the common trap of telling yourself that you will “save more money when you make more money.” The truth is that you probably won’t. You have to change your attitude about money, forgo some of your little everyday luxuries and redirect your focus to the long term. Financially responsible choices now lead to a lifetime of prosperity, and it all begins and ends with your attitude about money. Fix that and you are on the path to long-term wealth.