Saving strategies aren`t always easy, but they meet with success over time. A majority of people usually delay financial mileposts because of broader prevailing economic conditions. On top of that people have either less savings or no savings at all compared to the previous year. So how do you strategize to achieve financial goals?
A bulk of adults don`t have a financial strategy in place or need help with fine-tuning their strategy. Here are some smart habits that will help you achieve your financial goals.
1. Construct an emergency fund.
The best step to kick start the financial endeavor is to begin by having an emergency fund. The realistic way to set it up is by saving at least six months’ worth of living expenses. Never mix up the emergency fund with other savings because the emergency fund is the ready source of cash for unforeseen circumstances.
2. Save for various goals.
Once the emergency fund is established it`s important to segregate your next priorities or goals into three saving categories, which are short, medium, and long-term goals.
A. Save for short-term goals:
Usually, short-term goals are those you focus on attaining within a couple of years or less and tend to be specific with clear deadlines.
Some examples of short-term goals are,
- Car EMI payments
- House/rental deposit
- Home Renovation
Short-term savings should be fairly easily accessible. Few avenues for short-term savings are
- High-yield savings accounts.
- National Savings Certificate.
- Treasury bills.
- government bonds.
B. Save for medium-term goals:
Set up midterm savings goals if you want to save for a down payment on a home, your kid`s education, or a wedding.
Medium-term saving strategies mostly take a few years- not more than about five years to accomplish and expensive than short-term goals.
Some examples of medium-term goals are,
- Buy a house
- Start a business
- Save for a down payment
- Pursuing higher education
Medium-term savings don`t need to be fairly easily accessible like short-term savings. Some ways for medium-term savings are
- Money market accounts
- Mutual funds
- Direct equity
C. Save for long-term goals:
Long-term goal usually takes five years or more to achieve. For this type of investment, you have to ride out market volatility which is common in investing in stocks and bonds.
Some examples of long-term goals are,
- Paying off large debts
- Funding your retirement
- Feeling financially secure.
- Plan long-term care options
Long-term savings are usually met after five years. Some ways for long-term savings are
- Equity ETFs
- Target-date funds
- Real estate
- paying off a large debt, for example mortgage.
3. Use multiple savings accounts
Having more than one savings account is a useful way to make sure that money allotted for one particular savings goal isn’t being used for another. Also, you get a clearer picture of how you’re moving forward toward your different savings goals.
For example- If you have 50,000 saved in one account, it may be difficult to track that you have 20,000 saved for an emergency fund and 30,000 for purchasing a home.
4. Other ways to save money
Various mobile banking apps have made savings and money management easier and fun. Most of these apps have features of automated savings and budgeting tools to ease the whole business of savings.
One of the fun ways of saving money is a popular 52-week saving challenge that motivates you to save a small amount every week for a year.
End of the day saving money doesn`t have to be complex and mentally taxing. As you implement and develop your savings strategies, you can build and take control of your finances to secure a future for yourself and your family. Anyone can become a successful saver with the right strategies and by constantly checking up on your finances. Therefore, it’s important to build positive money habits that work for you.
Last but not importantly, never hesitate to seek professional help. When it comes to saving money, minute changes can add up quickly and you can see the fantastic results over the years.