Savings: Your Key to Success
You have wants. You have needs. And you have two ways of paying for them—pull out the credit card or use the money you have set aside. Which is your default? How do you save when there are bills to pay and the paycheck only goes so far?
Do It Now
Even without a specific goal, saving immediately will make you feel good. Have debt? Put a little aside anyway. Acquiring a savings habit as soon as possible is critical. By setting a little aside each month while aggressively paying down your obligations, you will graduate into being debt free with a happy little nest egg in place. And in the event of an emergency you won’t have to touch your credit cards and feel like you’re driving in reverse.
Set a Goal
All achievable goals share the same five factors:
Specific: Describe your goal to the smallest details
Measurable: How much do you need to save?
Actionable: Break it down into reasonable action steps
Realistic: Could you really achieve this goal in the given time?
Time-bound: What is the time frame for the goal?
Put it somewhere
How much money you have, your time frame until you need the money, and your personal risk tolerance will determine the best home for your money. A few types of accounts you may consider are:
Savings account : A great starter account. Interest is often low but so is risk. The minimum required deposit is typically small.
Money market account: This savings account typically pays slightly better interest than a savings account but may require a higher minimum balance.
Money market fund: A fairly secure mutual fund account invested in high-quality, short-term investments. Typically requires a higher deposit and is higher risk than a savings account, but typically pays higher interest.
Certificates of deposit (CDs): Generally a three-month to seven-year investment commitment depending on the timeframe you want and select. CDs offer higher interest rates that are fixed for the duration of the CD, but often require a greater initial deposit and have a penalty for early withdrawal. Some CDs are FDIC insured.
For mid to long-term goals, you may opt for investment vehicles rather than savings vehicles. After you’ve saved enough in one of the above accounts, you can transfer your money with a longer time frame to mutual funds, bonds, or individual stocks if you wish.
Impossible? Not at all. With careful planning, savings is the key to successfully managing your money and getting what you want.