Smart Savings Strategies to Live By
If you consider yourself a savvy saver, congratulations! But if you need a little coaxing in this area, we can help. It’s important to realize that just sticking to the basics will go a long way. Perhaps the relatively low interest rates available today are enticing you to refinance your home. Well, those low rates may be great for refinancing, but when it comes to your savings and checking, those rates are nearly at zero. This doesn’t give you a lot of incentive to make anything beyond the bare minimum. You’ll have to cut elsewhere or augment in other ways if you plan to save up a nest egg for emergencies, college or retirement.
Check out these tips:
- Curb your spending. Keep the essentials and keep paying off your bills and credit cards, but cut out extra spending that’s only hurting you. Remember, today’s dollar will be more valuable in the future and any money you spend today is impossible to invest in your future.
- Research rates. Keep your eyes peeled for higher yields on bank accounts– at least a quarter higher than what you’ve been witnessing.Yielding cash flow this way still won’t be enough, so look into CDs or savings bonds if you need to save for the short term.
- Diversify your stocks and mutual funds. For longer-term goals, look into an investment portfolio that combines a healthy mix of stocks, bonds, market hedges and even precious metals (if you feel comfortable with those!) for a pretty solid return. Often referred to as an all-weather portfolio, this is a smart savings strategy that many successful investors employ.
- Don’t be afraid of a little risk. In order to build up substantial savings quickly, you need to assume a bit of risk. For high yields, go for bond funds, dividend-paying stocks, real estate investment trusts or callable government agency bonds from Fannie Mae and Fannie Mac, saysBankrate. Sure, you can experience higher returns, but remember the risk is also higher since they’re not insured by the FDIC.
- Pay down credit. Those high-interest credit cards are killing your savings potential. First, pay down high-interest credit card debt, then refinance your mortgage so your monthly payments aren’t as high. Work on adding to your emergency fund in case your water heater goes or your roof starts leaking.
To become a committed saver, you need to look at your short and long term goals to come up with a solid plan. Of course, the earlier you start saving, the better. Let’s take a look at an example: a 20-year-old who saves $200 a month until retirement age at a rate of6%, you could retire with $550,000 in your account.
However, it’s never too late to start saving. All it takes is some steadfast dedication to the future, and that all starts with having a plan. You should also secure a trusted financial planner or stock broker who has the expertise to guide you in your investments. For those brokers who don’t end up doing such a great job of that, you’ll need a securities fraud attorney.