Saving money can often be a challenge—especially during times of financial uncertainty. As humans, we’re wired to take care of our needs now, and worry about later… well, later.
However, saving money is a critical component of financial wellness. As we get closer to the holiday spending time of year, here are tips to saving (even a small amount) now vs. later can make all the difference:
Putting aside a set amount each month helps protect us in a financial emergency. Perhaps it’s a surprise medical bill, car repairs, or temporary loss of income. There are many reasons why an emergency fund is critical to help handle unexpected expenses. Plus, building up emergency savings to cover unexpected expenses is better than using high-interest credit cards or taking out a loan. An emergency fund gives you peace of mind and prevents you from going into debt.
For those anticipating making large purchases, saving money can help us prepare our budget to pay for expenses that we plan to take on – such as a down payment on a car, home improvements, or an upcoming vacation. Emergency savings are also useful for smaller cash outlays like costs for pets, car maintenance and other important bills Here again, by saving up for planned purchases whether they be the significant expenses or lower cost items, we can avoid using high-interest credit cards or taking on other debt. When you plan ahead, you take control of managing your monthly income.
Financial stress is real. It can be overwhelming to have bills and expenses that we struggle to pay each month. In fact, many researchers see a significant connection between financial stress and mental health and well-being. During the ongoing pandemic, financial strain is felt by the newly unemployed, furloughed, and those still working but facing an uncertain future. When you build up savings, you reduce the stress many of us feel about our finances and give yourself a gift – peace of mind.
Gaining a sense of freedom might not be the first reason that comes to mind as a benefit of setting up a savings plan. Setting aside even $20 a paycheck is proven to provide a feeling of freedom due to the “buffer” savings gives you. Knowing that a savings “nest egg” exists gives people more freedom to choose how to handle their finances, rather than feeling stuck in a particular situation.
1.Assess your budget.
Use our Budgeting Worksheet to get a handle on your monthly income and typical expenses, including credit card debt or other loan payments.
REMEMBER: If your income is greater than your expenses, this is a budget surplus: use this money to save for goals and to add to your savings account! If your expenses are greater than your income, this means you have a budget deficit.
2.Commit to a monthly savings amount.
Once you have a complete picture of monthly income, expenses, and debt, consider how much you can set aside each month to build up savings. How much you set aside will depend on your financial goals. For instance, if you’re planning for a large purchase, break down the amount over a 6 month or 12-month period, and automate savings to meet that goal.REQUEST TO OPEN A SAVINGS ACCOUNT
3.Automate your savings.
Automating savings makes it more “painless.” You’ll be able to set it and forget it, by paying yourself first through automated deposits.
Set up AUTOMATIC TRANSFER via Web-Branch
Ensure you’re maximizing the interest you’re earning by getting a competitive annual percentage yield (APY). Consider a money market or other higher interest account.
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5.Make it a family affair.
Setting a savings goal with loved ones lets you come to a consensus about goals and dreams. That way, it is easier for you all to plan and encourage each other to save for emergencies, planned expenses, or other goals.
Saving for the future is closer than you think. Building savings can seem like a daunting task, but you will start to see results with practice and patience.
If you’re unsure how much you can reasonably save each month or need a helping hand getting started, you can request a FREE Individual Financial Analysis. This is a 30 minute ,one-on-one analysis of your financial situation with an MTC Federal Financial Expert to evaluate your credit and cash needs and provide a custom solution that’s best for your lifestyle and household.
This article is shared by our partners at GreenPath Financial Wellness, a trusted national non-profit.