Most Americans know that putting away money for the future is crucial at all stages of life. Whether individuals are saving for a home, planning to put their children through college or boosting their nest egg, understanding and employing wealth-building strategies is necessary to stay on track. When it comes to saving substantial sums of money, time-honored tactics are the most effective way to go about bolstering a healthy bank account.
First, individuals should recognize that in order to save money, they must get rid of debt. Large payments and added interest charges eat into resources that could be used to prop up a savings fund.
Eliminating debt can seem easier said than done. However, working with a professional, such as a credit counselor, can educate consumers on the most effective ways to pay off their balances. Individuals should begin paying off their high-interest credit card debt before other accounts, because these accounts impose the highest charges.
During this period, it can be helpful to cut back on unnecessary spending and other behaviors that are contributing to high balances. Canceling pricey cable packages, eating out less, brewing coffee at home, and switching to more affordable insurance and utilities companies can lead to substantial savings over the course of a year.
In addition to eliminating debt, consumers must be diligent about putting money into a savings account on a consistent basis. Many individuals are good about placing a percentage of their paycheck into an account in the beginning, but then slack off down the road when they don’t see immediate progress. Saving large sums is a slow process, but a worthwhile one.
It may be helpful for adults to have a percentage of their check deposited directly in a separate savings fund. When consumers must transfer money to a separate account themselves, they often pay themselves last or get caught up in the temptation of spending it. By having the money directly deposited, they can eliminate some of the hassle and the temptation of using the funds for other unnecessary purposes.
Lastly, being in a sound financial position also means having a separate fund for emergencies only. A rainy day fund allows individuals to manage sudden costs without being forced to ruin their hard work by turning to credit cards or draining their savings. Most experts recommend setting aside enough money to cover three to six months worth of expenses. More conservative professionals say that in a down economy, having a cash cushion that will provide for consumers for nine to 12 months is preferable.