How to make sure you hit your savings goals
Hit all your savings goals by putting a system in place that automatically saves your money for you.
The best methods to save money are often the simplest. The key to saving money is putting a system in place that automatically saves your money for you.
You can use this guide of the best methods to save money to become financially responsible and independent.
Start by following these steps:
1 - Create a personal budget
Before you can start saving any money you first need to know exactly how much you are spending.
Without knowing your expense you cannot know how much you have leftover to save and thus put into an automated savings plan.
Start by creating a personal budget sheet and populate it for the last 2 months.
Now you will know how much money you have to start saving.
2 - Create a different money-saving goal
Write down what you would like to save money for.
Examples may include: A safety net for an emergency, to make a big purchase like a house, retirement, etc.
3 - Put your money to work for you with an automated savings plan
Create an account for each goal and based on your budget automatically deposit a specific amount of money into each account every week.
You can do this by configuring recurring weekly deposits of money from your checking account into a savings account of your choice.
For those without a current after-tax savings strategy, opening an investment account through a robo-advisor like Betterment or Wealthfront is a great place to start. These accounts will automatically invest your savings in stocks, bonds, and money market funds.
The focus of this money-saving plan is automating an individual’s after-tax savings, with the assumption that the individual is already actively contributing to an employer-sponsored 401(k) or a comparable retirement account.
Here is an example of how you can set up your different accounts to automate your savings and meet your financial goals:
1 - Build wealth with an investment account
To supplement your retirement savings, you can open an investment account with a robo-advisor like Betterment.
If you can retire early, you will be able to withdraw money from this account without any penalty or restriction.
Once a month (or however you set it up), Betterment will pull money directly from your checking account to be invested.
2 - Save for a big purchase with a Down Payment Fund
While I do not believe that the achievement of the American dream is defined by homeownership, it may be a dream of yours. Or maybe you have a personal goal of purchasing an investment property in the near future.
In order to save for the down payment of that future property, you can set up a high-yield checking account with someone like CITI Bank.
Each week, deposit funds in this account from your checking account.
Before you know it you’ll have saved money to purchase the property. Of course, you can do the same for any big-ticket item like purchasing a car.
3 - Retire early by putting money into a Roth IRA
With a yearly contribution limit of $6,000 for 2019, you can set-up a monthly deposit of $500 to this account to max out the contribution for the year. Betterment offers Roth and Traditional IRA accounts.
4 - Prepare for your next getaway with a Travel Fund
I’m not sure about you but I like to max out my vacation every year if I can.
To avoid missing any last-minute travel plans due to lack of savings, it is good to open a separate high yield savings account.
On a weekly basis, you can configure an automated deposit into this account to prepare for your next big trip.
Now you can rest easy at night knowing your money is going to work for you. All you have to do is continue to track your monthly budget and adjust your withdrawals and goals accordingly.
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