![]() ![]() If your job offers a 401(k) plan, sign up now (if you haven’t already) to take advantage of one of the best forms of automatic saving. It’s critical to build retirement savings early so you can benefit from compound interest, that is, earning interest on your interest over time. This is true even if retirement seems far away. The sooner you commit to saving for retirement, the better. Instead, they can grow untouched in savings or retirement accounts. That way, those funds aren’t available for impulse purchases. How? Successful savers automatically direct a set amount from their pay into savings, so that it never hits their debit or checking account. The best way to make steady savings a habit is to put that money out of sight. It’s also easy to let day-to-day living get in the way of achieving those goals. ![]() It’s great to have goals like saving for retirement, a vacation, or a down payment on a home. (To supercharge this habit, consider automating your savings.) Even if you start with a small amount, you’ll be ahead of the game if that unexpected expense crops up. The point is to be sure to include an emergency fund in your budget. You could start with a smaller amount, say $1,000. To avoid that scenario, financial experts recommend shooting for 3-6 months of living expenses in an emergency fund. For example, if you can’t pay for at least part of a major car repair or medical expense, you might end up relying on a credit card or cutting back on long-term savings. Build an emergency fundĪn unexpected bill can quickly knock your finances off track. It can make the difference between just staying afloat and truly getting ahead. Whatever budgeting tool you use, the power of this money habit comes from tracking your spending on a regular basis. This budget is popular because it helps people balance long-term savings and necessary expenses with spending for fun and enjoyment. One place to start is the 50-30-20 rule, which offers a guide for needs, wants, and savings. So look for the one that would work best for you. There are many tools and methods to choose from. Your budget helps you save money by showing you where you might be able to cut back. Once you have a clear picture of your finances, it’s easy to set up a budget. That will make it easier to keep your budget current, which is the next key habit. It’s a good idea to review and update this information once or twice a year. For other loans, like a car or student loan, note the balance, payments, and when they’ll be paid off. If you have credit card accounts or other revolving credit, make note of the interest rate and minimum payments required. When you do this for a couple of months, you will see how tweaking your spending habits could help you boost your savings. These might include that fancy coffee you buy on your way to work, restaurant takeout, or even name brands when generic will do. Then tally what you spend on discretionary items. What’s your take-home pay each month? And how much do you spend on basic living expenses? These are items like rent or mortgage, groceries, transportation, childcare, insurance, and entertainment. The first step toward financial wellness is knowing exactly how much money you have and where you spend it. ![]()
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