By Patricia Jones, Alliance Poverty Task Force
In last week’s article we talked about New Year’s resolutions and how to turn them into SMART goals. For the next few weeks we are focusing on financial resolutions. Remember to prioritize, focus on one goal, then break it into smaller, manageable pieces.
What are the most common financial resolutions? Save more money, pay down debt, and spend less. These are all important goals to helping anyone achieve financial security, and we will look at each separately.
Save More Money:
Define why you want to save more. Are you trying to build an emergency fund so you can handle an unforeseen expense if a crisis occurs? Are you saving for a vacation, Christmas, college, retirement, a house, or some other major expense? If you don’t understand your needs and options, talk to one of the financial advisors in town.
Rather than making a resolution to save, why not look into automatic savings plans? You can save money directly from your paycheck or transfer it automatically from your bank account into several types of savings accounts.
Remember to start small. Save something out of each paycheck, maybe $10 a week or $50 a month. Your employer might set up an automatic transfer into a savings account, so it is taken out as a deduction before you receive your payroll deposit or paycheck. You might set up both checking and savings accounts at your credit union or bank. Then you can set up an automatic transfer of funds on a certain date each month or week. If you rely on yourself to move the money, odds are you’ll forget, and the money will be spent before you realize it’s gone. But if it has already been moved, you won’t spend it.
Many people who still use cash use tricks to save. They empty their pockets or purses and throw their coins into jars every day. Then on a regular basis they take their jar to the bank and have it dumped into the coin sorter, then deposited into their savings account. A new strategy is the $5 trick. Every time a person receives a five dollar bill as change or a tip, they save it. On a regular basis they take their Abrahams and put them into their bank account.
Those who no longer use cash might use a round-up app for purchases. Apps like Acorns, Chime, or Qapital round up debit or credit card purchases to the nearest dollar, then save or invest those cents. Many of these charge a monthly fee, so research round-up apps carefully before choosing this option.
Put any unexpected cash into savings. People receive birthday money, bonuses from work, tax refunds, even rebates from stores. This should be money you weren’t relying on, so you can save it for a major purchase or add it to an emergency fund.
You should start saving for retirement as soon as you become a full-time member of the labor force. Or start now. Your retirement savings earn compound interest, which means your money is earning money that is reinvested to earn even more money. The money grows far more than you think, so the earlier you get started, the better off you’ll be. There are so many ways to save for retirement that we will look at this in a future column.
Savings may be directed to other goals. Most credit unions and banks offer Christmas Clubs. Nebraska has an excellent 529 savings plan to pay for future college expenses for yourself or a family member. You should have at least $2,000 in an emergency fund you can access immediately. Experts recommend six-months of income in another type of account that you can access if you lose your job, have a health emergency, or need an unplanned home repair.
Are you ready to make a SMART goal to save? Your SMART goal should be Specific, Measurable, Attainable, Relevant, and Time-Based. Consider talking to your employer or bank to set up automatic savings. Saving money creates its own reward!