How to Get Started Building Savings for Your Future

Do you struggle to save money each month? Are you frustrated with a lack of progress toward your financial goals? You are not alone. Saving is challenging, especially when times are tight.

The good news is that there are steps you can take to set yourself up for financial savings success. These steps can be implemented whether you are just getting started building savings for your future or are looking to increase your monthly savings.

1.       Understand Your Income and Expenses

The first step to saving is increasing your awareness and understanding of your current finances, specifically your income and expenses. To do this, start by identifying and tracking exactly how much you are bringing in on a monthly (or quarterly, or annual) basis. Be sure to be tracking your net income, or what you take home each month after taxes, insurance, and any other deductions are taken out of your paycheck.

Next, identify and track your monthly expenses. Make sure you are comprehensive about this step – it is crucial! Knowing exactly how much you are spending, and how that money is being allocated is important before you can begin growing your savings. Once you have an itemized list of your expenses, separate needs-based expenses (such as housing, food, and medical expenses, among others) from discretionary expenses (all non-needs-based spending, such as restaurants, entertainment, subscriptions, etc.) Needs-based expenses are typically fixed (or more difficult to reduce) and discretionary expenses are more easily reduced to free up funds for saving.

2.       Set a Budget, and Stick to It

Once you understand your net income and your expenses, you’re in a better position to create an informed budget. Your budget will be your road map to savings success. Whether you map out your budget with pen and paper or on the computer, you’ll need to set realistic limits for spending on the different items you identified in Step 1, using your past spending to help inform your budgeting choices. Your budget should be realistic, prioritize essential needs over discretionary items, and help guide your decision-making about spending.

3.       Reduce Expenses Where Possible

In order to free up funds to save, you’ll have to find ways to reduce your spending. Scrutinize your discretionary spending choices and continue to track this spending month to month. Consider making your coffee or lunch at home rather than purchasing takeout or reduce the number of times per month you eat at a restaurant. Take a look at subscriptions that you pay for but might not really need and consider alternatives, such as Netflix instead of Cable or a home workout app instead of a gym membership.

4.       Be a Smart Spender

Being smart about spending requires both being intentional about what you spend your money on, and about how you pay for things you buy. If at all possible, try not to carry a credit card balance and pay the cards off in full each month. Interest rates on credit cards are extremely high and can eat up a large portion of the savings for which you’ve worked so hard.

5.       Know Your Goals and Celebrate Your Achievements

Goals motivate us to keep pushing forward. When it comes to saving, you should identify your big-picture goal – your “why bother”. Are you saving for something special? A house, a college fund, a vacation, or an emergency fund? Keeping your big picture goal in mind when you make day-to-day spending decisions can help you make tough choices.

In addition to the big picture, set an achievable average monthly savings goal and an annual savings goal. Keep track of your progress and find a way to reward yourself when you achieve a goal (perhaps by going out to dinner or a movie). This helps you to look forward to achieving a goal again and again.

Each action you take will help you get closer to your financial savings goals. Try to have fun with it rather than viewing it all as work. Be sure to pat yourself on the back for making the effort to improve your financial future and enjoy the process along with the results. With time, you will get better at this process and will be able to achieve bigger goals.

Don’t wait – get started with these steps today to start building savings for your future. Your future self will thank you for it!