During tough economic times, it is extremely important to be able to implement a saving strategy to manage your finances. Especially, if you find yourself in financial trouble due to bad financial management, sticking to your budget can offer you direction and a guaranteed method to spend your money in a controlled way. However, your saving strategy should accurately reflect your current financial situation. This means that you should definitely include all sources of income and any type of fixed and variable expenses so that your budgeting serves as a tool for effective financial planning.
The following are strategies to make sure your saving strategy can help achieve your goals.
Set clear goals
The most important part of a long-term saving strategy is to understand what you’re actually saving for. Are you looking for a retirement home in Palm Beach? Do you want to send your three kids to college? Do you want a lavish retirement fund? The clearer the picture of your long-term goal, the easier it will be to set up a daily spending plan that will truly affect your success.
Make sure to set realistic expectations that can be met by your income. If your income is high, it makes sense to set high financial goals, but if your income is moderate, you should be careful with your long-terms goals to avoid frustration in the long run. In fact, your budget should be your tool of financial control and should be set to help you meet your minimum spending goals. Then, you can build upon these mini-goals and set higher ones every month or every second month.
Set spending goals
Did you spend $210 on eating out last month? This is $7 per day. Can you afford to spend $7 per day for eating out? If not, it would make sense to set a spending goal at $165, which makes $5.5 per day for eating out. In doing so, you actually save $45 per month on eating expenses. Over time, you will see that your budget is working towards saving money and you can even achieve zero-spending days if you take lunch from home every ten days or so at work. Set minimum spending goals and make sure to reach them. Soon, you will have a budget that can set a direction towards saving money for a rainy day.
Change your attitude
Putting your money into a savings account can be tough, especially if it means cutting off expenses for coffee and restaurants. But, if you change your attitude, you are more likely to meet your long-term goals and you can do that by adjusting your mindset to the short-term goals. For instance, if you want to join a cruise that will cost you $3,500, try to put aside $50 a week. In doing so, you can achieve your goal and take the trip of your dreams. So, in reality, by saving on eating out, you can have money for leisure if this is what you really want.
Understand the different categories of expenses
There are different kinds of expenses that you can include in your budget in order to make your saving strategy work. The typical categories of expenses you can include in your budget are household expenses, food, childcare, healthcare, education, car expenses, insurance, loans, savings, taxes and pet care, among others. By including different spending categories, you can sum up each category on a weekly basis and see how much you spend on expenses that you can actually lower such as entertainment, personal care, shoes, clothing etc.
Be extra accurate
If you earn $72,513.64 per year from multiple sources of income, make sure to put in your saving plan the figures that sum up to this exact figure. Also, when you calculate the total of many figures, include decimals as well because, if excluded, decimals can produce an entirely wrong figure.
Use cash in your transactions
If you are an American, you are probably into charging your credit card or using your debit card instead of carrying cash with you. However, using cash in your transactions will help you set up a successful saving strategy because you can know exactly what you are spending at any given moment. In fact, cash helps you control your finances better and spend only the money you can afford without charging your credit or your debit cards with extra fees or over-the-limit charges. Even better, you may get discounts for paying in cash.
If you don’t understand how money works, try to educate yourself with simple stuff. Read financial books for dummies, attend seminars, follow financial experts, listen to financial planning audiobooks, do anything it takes to educate yourself. Find out what money can do for you and use this knowledge wisely to fully capitalize on the time value of money and ensure safe retirement years.
In conclusion, by crafting a realistic saving strategy, you will be able to anticipate situations such as budgeting for unexpected expenses, saving for income cut, starting an emergency fund and so on. Just make sure to review your strategy periodically to be in line with your long-term financial goals, while keeping your short-term goals in the picture.
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