Regardless of what you’re saving for – a down payment on a home, a dream vacation, a child’s education or your eventual retirement – developing good saving habits can definitely pay off. Even relatively small but regular contributions can quickly gain momentum thanks to the power of compounding, or making interest on your interest.
Most people can rationalize buying new bedroom furniture or a better and more reliable car by using small monthly payments spread over several years. However, you can also use this strategy to build hefty savings.
For some, saving is instinctive. Chipmunks know they must save enough nuts and seeds to get them through the winter. They even build storage rooms in their burrows.
But it’s important everyone – even humans – realize the importance of saving.
Deciding on your goals for the future
The first step is determining an investment strategy and that means carefully evaluating your financial goals. After all, saving for a down payment on a house or a new car requires a different approach than long-term retirement planning. So, ask yourself this: what do you want to do with your money?
Crunching the numbers
Next, set up a spending plan to help you determine how much you can afford to put away each month. There are plenty of online tools and calculators that can help you.
Start by going over your chequing and savings accounts and credit card statements, including ATM withdrawals. Make sure to include everything – even those pricey takeout lunches. This exercise can help you trim excessive spending.
Once you have a better understanding of your income and expenses, determine your savings “payment.” Be bold, as you can always dial it back a bit later on. Or better yet, keep the amount steady and reduce your overall spending. Then, as your income grows, continue to raise the amount you put away each week.
Choosing the right investment solution
Your financial professional can help you choose the right mix of investments and help you achieve your unique savings goals.
Why it’s is crucial to start saving now
Setting up a regular, automatic savings plan is an essential part of anyone’s financial health. The sooner you start, the better off you’ll be and the sooner you’ll achieve your goals.