How can you think about saving for the future when you have student loan debt, a car loan, credit cards or maybe all of these? Saving for the future may be an idea that is hard to digest but it is one that is important to consider. You may have dreams…of travel, getting married, or buying your own home. Starting to save today will help you realize those dreams in the future.
To get where you want to go, you must first start by taking a look at where you are. The best way to do that is by tracking your income and spending for a number of months until you start to notice the trends of how you spend your money. Three months of tracking is a good place to start. Track all of the income that you receive each month, through your steady job as well as any side jobs that you may have. Then track your spending. Start with food and medicine, as they are the most important to your survival. Then note your housing and transportation costs. And don’t forget to track expenses that are not so predictable, like hobbies and entertainment. By tracking your income and spending, you will have a good sense of where your money comes and goes.
Do the ways that you spend your money reflect your values? Help you to achieve your goals? If the answer is yes, then keep doing what you are doing. If the answer is no, then it may be time to reconsider the expense and make the changes necessary to align your spending with your values and goals.
You may need to make more room in your budget for saving. Look at some of your larger expenses first. Housing tends to be one of the largest expenses in people’s budgets. Are you paying more than you should for housing? Maybe you can move to a smaller space, get a roommate, or move in with family for a period of time. Transportation costs can also grab a large percentage of your budget. If you have your own car you are likely paying a car loan as well as insurance, gas and maintenance. Is is really necessary to own your own car? Is there reliable public transportation where you live and work? Can you get by using public transportation along with the occasional ride share? Reducing transportation costs can go a long way towards helping you save for other goals.
Then, look at your debt payments. Interest payments add up over time and can take a big bite out of your budget. If you are making minimum payments on your credit cards consider making higher monthly payments with a goal of eventually paying your credit card bills in full each month. Also, take a look at your student loan payments. Graduates are automatically set up in standard ten-year repayment terms that can be difficult to pay each month. If that is the case for you then contact your loan servicer to discuss other repayment options.
What are your goals?
It is easier to stay on track with saving if there is something you want to save for. To reach a SMART goal, you will need to make a plan. The framework SMART stands for:
- Specific – clearly define your goal, including a timeframe for achieving it.
- Measurable – if your goal involves a financial commitment, you can measure progress by how much you saved toward it.
- Attainable – is achieving your goal more important than the time, effort, and money it will take, compared to all of your other obligations and priorities?
- Relevant – why do you want to reach this goal? What is the objective behind the goal, and will this goal really achieve that?
- Timely – assigning a deadline for your goal will motivate you and keep you accountable.
Applying SMART Goals to your dreams brings them from the abstract to the concrete. It gives you a timetable by which you can achieve them. If discover that your goals isn’t as realistic as you once thought, you can change the scope or timeline to make it a goal that you can attain.
Automate, automate, automate
There is a saying that you should “pay yourself first.” But how can you do that when there are so many other spending priorities competing for your attention? The easiest way to do that is to automate your savings. You can use either direct deposit or an automatic transfer from checking to savings each month. Start small: an automatic transfer of $10 each week will grow your savings balance to $500 within a year and $1,000 by the end of the second year.
MySmartMoney Tools and Resources
For more useful tips and tools to help you manage your money, check out https://www.unitedway.org/my-smart-money to take a quick and easy quiz to get a clear picture of your financial situation. Here you can also download tools which are geared to help tackle your specific needs, including things you can start improving today as well as downloadable checklists to help you map out your financial future.