Saving Money: How Can I? Should I?

To begin the process of saving, it helps to start by thinking about what we are saving for. Is It for emergencies? It is for education? For retirement? Is It for investments? Real estate opportunities? Stock investing? Starting our own business in the future? These are questions that can help us narrow down what our savings goals are, to begin with.

Once we have established our savings goal(s), the next step is to set aside the portion of our income we want to save toward that specific goal. It helps to move our savings money into a different bank account from the one we spend our money from. In this way, our savings become separate from our spending, making it less tempting to wipe them out and spend them on something else.

The next step is the hardest and requires an enormous amount of discipline. Continuing to set aside our pre-determined amount of money for our goal(s) takes a lot of work. This is especially true when we have financial bumps in the road come along and we feel increased financial stress. However, as we keep setting aside savings on a regular basis, something magical happens. Our savings balance grows and grows and grows. We begin to see the possibility of reaching our savings goal, whatever it is.

It helps us to think about savings as a way we can expand our financial outreach and grow our money over long-term periods. If we are saving for retirement, we may want to investigate 401K plans, Roth IRA’s, and other retirement accounts, depending on the type of plans our employers offer us and potentially match us in terms of contribution payments.

If we are saving for real estate investment opportunities, then also learning about renting out properties to produce a sustainable cash flow may be helpful. If we are thinking about stock Investing, we may want to research our options. Learning about the S&P 500, the index containing the top 500 performing companies within each unique sector is a great starting point. We can then build on this knowledge by learning about specific companies if desired. 

Professionals in the industry recommend staying conservative within a volatile market. Due to the unprecedented times, we find ourselves in currently, understanding why our account balances aren’t gaining as much interest as we would like is helpful information. Understanding the market may motivate us to expand our levels of savings so we can properly adjust to market movements and meet our savings goals.

We don’t need to risk all our savings in one category. Diversifying our money can insulate us from volatility. David Blanchett, who is Morningstar’s former head of retirements research said, “Assuming you’re in a risk-appropriate, well-diversified portfolio, the best approach is probably to hang tight.” This may be a good rule of thumb in financial saving situations. Ultimately, how we save our money will determine how satisfied we will be with our financial decision-making and the accomplishment of our financial goals. Our real goal as we continue to save is to be happy and joyful with our finances and to move away from feeling stressed out about money. 

  

Here to help,

 

Your Financially Fit Team