Savings for a goal, sounds pretty simple and honestly, for the most part it is, but there's an easy way and a hard way to save. The hard way means risking decision fatigue, having one more thing on your to do list every single month, doing all the heavy lifting yourself and the possibility that there won't be anything left over to be saved at the end of the month. The easy way means taking a few minutes to set things up and then ultimately sitting back while you watch your savings grow. In this video, I'll share the five key steps to saving the easy way. A client recently went through these five steps and we're going to dive into each of these shortly. But thinking back, she was living paycheck to paycheck in this situation and ultimately she needed to dig out from credit card debt and had zero savings. When she came to me, she set forward the goal of someday saving up $15,000 for emergencies. But she didn't know if it was achievable. Sometimes when a goal seems pretty daunting. Here's where you can start. First, consider using separate accounts just for that goal. Using a separate account enables you to clearly see your progress, and that's a very important part of maintaining motivation and keeping you moving in the right direction. If you have two savings goals like let's say for an emergency fund or a down payment, you should be thinking about using two separate savings accounts. Another example, you're building your emergency fund and you're saving for a home. If you didn't use this two separate account approach, you just had everything lumped together in one big savings account. Then what's going to happen if you lose your job and you have to start using the money from your savings account until you find a new job? Every time you take money out of your savings, you're going to wonder, am I taking money from my emergency fund or from my down payment fund? Is it okay for me to take this money out? How much is okay for me to use? On the other hand, if you had the separate accounts, you'd actually have clarity and peace of mind that the savings that you're using to pay for expenses is actually coming from your emergency fund, which by the way, is exactly what that money is intended to be used for in the first place. You wouldn't have guilt, you wouldn't be wondering whether or not you're actually spending your down payment money, you'd ultimately have certainty. Separate accounts also keep things super organized and clear, that way you always know exactly where you stand. That's one of the things that got that client that I talked about before on track, she stuck to her bare essentials budget each and every month, and then she kept her savings accounts separate to align with her goals, and this helped with out of sight, out of mind mentality where she couldn't easily access or spend the cash compared to if it was all in her checking account that she used every single month. Next, get some interest on your savings. You may want to look for, let's say, a high yield savings account or any account that earns a little bit of interest on your money. That way you can make money on your money while saving for a goal. You could also consider something like a certificate of deposit or CD, and that allows money to grow over a certain period of time at a promised interest rates. But one thing to keep in mind with a CD is that there may be penalties if you use the funds before the end of the term. Another option is money market accounts, where you can potentially earn some interest on your money. Third, once you have your savings in your separate accounts set up, the third step is commit to contributing a certain dollar amount or a percentage each and every month. If your income is pretty much the same every month, then committing to a dollar amount like let's say $300 or a $1000 per month can be a great way to go. If your income fluctuates due to commissions or inconsistent hours, maybe even opening a business or having periodic bonuses paid out, then you probably much better committing to a percentage of income to save rather than a specific dollar amount. That way you automatically save more when your income is up and less when your income is down. Either way, you'll be making progress the entire time. We made it to our fourth of five steps to save you money the easy way. Next, make it automatic. Setting up automatic transfers from your checking account to your savings account means that you're making a great decision once and then letting it last for a long period of time, maybe even years. Instead of deciding how much to save month in and month out and then manually moving that money over, setting up automatic transfers not only eliminates the decision fatigue that comes with choosing how much to save each and every month, but it also ensures that savings comes first before spending and it'll increase your chances of making progress. The client I told you about earlier, automatic transfers were the easiest way for her to remember to deposit money to emergency fund every single month and for her savings to grow faster over time. Last but certainly not least, is to align automatic savings contributions with your paycheck. If you set that automated transfer to hit on payday, it prevents you from having the chance to spend it. Once you get used to it, you likely won't even miss it. That's why I encourage that client to do with the $15,000 emergency fund goal. She prioritized automatic savings on payday. But then also I encourage you to check her balance and keep track of what those contributions were to see this change over time. Watching your account grow, offer some gratification and encouragement along the way and shows that the plan is actually paying off and offers the opportunity to celebrate some successes. First, she focused on hitting that first $1,000, next $ 5,000, and then slowly but surely, she got closer to her goal. Perhaps now after hearing her story and these five easy steps that you can start taking right away, you're ready to make progress on your savings goals the easy way. In fact, take a couple of minutes, write down a few things that you can do to adjust the way that you're saving and then make it as easy as possible for yourself.
