With the holiday season upon, if you’re anything like me your spending is about to go through the roof. From Christmas presents to dinners with family and friends to holiday parties and everything in between now is the time of year your wallet gets a little bit lighter.
Once you realize just how much money you’ve spent over the holidays, you’re likely going to think to yourself “Geez I really need to watch what I am spending and start saving”. What better time to start a cash flow plan on how to maximize your savings and reach your financial goals.
Here are 6 tips to help get you started:
1. Pay yourself First!
You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 10% to 20% of your salary for financial planning BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.
2. Be realistic.
Time spent developing a budget is time well spent.
A common error people make when they’re planning their household budget is to list unrealistic dollar amounts. If you spend $500 at the grocery store each month, then it isn’t reasonable to list $300 in your budget.
Keep a spending journal for at least two weeks prior to creating a budget for your family and yourself. This will help you establish realistic numbers. A comprehensive budget will not only tell you where the money is going, it can give you a map to tightening expenses. Also, it will allow you to put more money away for your short-term and long-term goals.
3. Know the difference between luxuries and necessities.
Knowing the difference between a “want” and a “need” can help you save money.
Many of the items we spend money on are things we want. If you don’t have to have it in order to survive, then it is a want. If the item doesn’t fit comfortably into your budget, you need to set it aside until your budget is ready to handle the purchase.
4. Don’t ignore retirement.
Saving for retirement at an early age is a win/win situation. You will have to save less if you start early, and your savings will have longer to grow. Start early and save at least 10-to-15% of your income, if you plan on accumulating the wealth you need to live comfortably later.
5. Review Your Insurance Coverage
It’s important that you have enough insurance to protect your dependents and your income in the case of death, disability or sickness but too many people are talked into paying too much for life and disability insurance, whether it’s by adding these coverage to mortgages, car loans or buying the wrong type of insurance.
6. Take advantage of free money
If your employer offers a contribution match for retirement savings or health savings accounts, be sure that you’re contributing enough to obtain the maximum match amount. Otherwise, you’re missing an opportunity for free money.
~ Cam Duffy