5 Set Goals
It’s healthy to set goals. Think about your short- and long-term savings goals and put them down in writing. Short-term goals can be things like saving up for a new piece of furniture or a gift that you want to buy. Long-term goals can include having enough for a down payment on a house or for a big trip to Europe. When you set your goals and write them down, include the amount that you want to save and prioritize the listed items in order of importance.
4 Eliminate Debt
If you’re in debt, now is the perfect time to free yourself of it. Pay off your smaller debts first so you can use the extra cash to pay off your larger debts faster. When you use your credit card, for example, to buy something that’s $100, you’re going to end up paying more than $100 when you consider the interest charged. The longer that you’re in debt, the more interest you’ll pay. When you’re finally debt-free, pay cash for everything and keep a credit card around for true emergencies.
3 Plan for Your Retirement
It’s never too early to plan for your retirement, even if it is decades down the road. If your company offers a retirement plan, take advantage of it, especially if your company matches your contributions. “Forbes” recommends having a 401(k) account through work and a Roth IRA account, which is an individual retirement account with tax-free growth that lets you withdraw your deposits without any penalties or taxes.
2 Save for an Emergency
You never know if or when the unthinkable will happen. If you suddenly found yourself without a job, could you survive until you found another gig? Start building a rainy day fund in a savings account (not a jar on top of your fridge) by figuring out six months worth of expenses; this is how much you should put into your emergency fund. These expenses should include your rent or mortgage, utility bills, groceries, transportation costs, debts and other regular expenses, like medical or cell phone bills. When you finally build your emergency fund, don’t touch it unless it’s an emergency so you can have a financial cushion when you find yourself out of work or with a major necessary expense, like a car repair.
1 Know Where Your Money Goes and Set a Budget
When you make a budget, you determine how much of your paycheck goes toward fixed and necessary expenses (like rent and utility bills), the amount that you can save and how much you can spend on fun things like going to the movies or buying the pair of shoes you’ve been eyeing. When you set a budget, compare it to how much you actually spend so you can find ways to save cash. For example, if you eat out for lunch every day and spend $5, you’ll find that you’re spending about $1,250 a year. If you brown-bagged it instead, you could save the extra cash or use it to pay off your debts faster.