4 Tips to Saving for a Big Goal
So, you’ve got your eye on a new car. Or you want to finish your college education. Or you’re celebrating a wedding anniversary with a lavish European vacation. If you’re like most of us, you don’t have the cash to shell out for such expenses – which means you’re going to have to save up.
But if you’re not the best saver, that might be tricky. Never fear: Here we’ll discuss a few tips and tricks to jump-start your savings practice.
Tip 1. Divide and Conquer.
Make a list of all outstanding debts you have. You’ll want to get rid of as much high-interest debt (like credit card balances) as possible. Consider that you may be paying upwards of 17% credit card interest but only earning 1% in savings interest! With that math, it might be more prudent – and save you more in the long run – to pay down your balance before committing to a very low-interest savings plan.
Try dividing your funding: Allocate some money to savings and the rest to paying down your debts. Then, as you resolve your balances, move the entire lot into savings.
Tip 2. Follow the 30-Day Rule.
This savings rule is a mindset that encourages you to really evaluate the importance of each purchase. This is especially helpful for impulse buys. If you see something you like, make a note of it, and possibly take a photo – and then walk away. Push the purchase back 30 days, and instead deposit that amount into your savings account. After 30 days, if the item is still on your mind, revisit the purchase. (Often, after 30 days, you’ll reconsider the “need” for the purchase anyway!)
Tip 3. Consider What You’re Saving For.
Tailor your saving plan to your end goal. When saving for college, for example, look into your state’s 529 plan, which is a tax-advantaged savings plan designed specifically to help pay for education. Or if you’re saving for retirement, be sure your money is in an employer-sponsored plan like a 401(k) or a traditional or Roth individual retirement account (IRA). Rather than simply putting everything into a savings account, these targeted savings plans have special provisions that help you maximize the benefits and reach your goals faster.
If your type of saving doesn’t fall into a supported category, like a 401(k) or an IRA, look for savings accounts that yield interest. But remember: If you’ll need access to your funds soon – say, to pay for your plane tickets to Europe – don’t squirrel them away in a CD or other “locked” account that will prevent you from accessing your money before a set period of time.
Tip 4. Keep Your Eyes on the Prize.
Keep your goal very specific: “I need $[XXX] by [THIS] date. Set a countdown clock, and hang a calendar with the target spend date. Take a photo of your goal and hang it in a prominent location. Having ways of reminding yourself of your ultimate goal makes the concept of saving more concrete – and makes it easier to avoid frivolous spending.
Keep yourself motivated to continue saving by making it fun: Draw a picture of a coin jar, and color portions of the jar as you reach designated savings milestones. Or create a paper chain, and remove the links as you get closer to your savings goal.
Saving money is a skill that takes practice. It can be hard to break the spending habit that many of us are accustomed to. You need a solid plan that makes sense for you – and the discipline to stick to your plan. If you’ve been unsuccessful at finding a savings strategy that works for you, reach out to the financial counselors at American Credit Foundation. We can help you uncover options to make saving for your goals a little easier.