Making just one goal with regards to your savings can make a real difference. Here are savings goals which can help you have a financially secure and less financially stressful 2010, so know your situation and choose one which best suits you.
Why You Need a Savings Goal
Goals are generally aimed at improving your life, and making the year ahead better than the one which has just passed. Unfortunately most people could be managing their finances better. If you think about the year which has drawn to a close, think about your annual wage and now think about how much of that you have saved. Chances are there is only a small percentage of your take-home pay in a savings account – if any at all.
This is why you need to make a savings goal, to take charge of your finances and take the stress out of 2010. While money may not be the most important thing in the world, when it has control over your life because you can’t pay your bills on time, or afford to spoil your kids the way you would like, then money becomes important.
Whether you are young or old, working full time or casually, whether you have a mortgage or credit card debts, you need to make a savings goal which will give you back the control.
Goal 1 – Pay off your credit card debt
Just because you have credit card debt doesn’t mean you can’t start a savings plan as your goal. You simply need to make it your priority to pay off your credit card debt first. The interest rate you are paying on your credit card purchases will be around 10.00% if you are on a low interest rate and could be as high as 30.00% and there are no high interest savings accounts which are going to pay you that rate of interest.
This means that before you start directing funds into a high interest savings account which can pay you around 6.00% interest, you need to get rid of your credit card debt, because any savings you make and any interest you earn on those savings will be canceled out by the interest you have to pay on your credit card balance.
Goal 2 – Focus on debt
If you have a home loan your New Year’s savings goal may not lie in a high interest savings account. If you have high interest rate on your home loan, it will make more financial sense to pay it off rather than adding money to a savings account which will deliver lower returns. By reducing your home loan debt faster, you will save money in interest over the long run.
[Editor: You can also work to get your home loan modified which could save you thousands over the life of the loan.]
Reducing your home loan debt, does not mean you need to allocate all your money to it. Make sure you keep some money aside in a high interest savings account. This will help to finance holidays or new appliances.
Goal 3 – Make regular savings
If you are making a savings plan and budget and have calculated you can only contribute a small amount, you may be discouraged in going forward with a savings goal. However, it doesn’t matter how much you contribute to your savings plan, as long as you do it regularly.
Regular contributions to your savings plan or high interest savings account means that your savings will always be growing – no matter how slowly they appear to be growing. It is also easy to set up a regular transfer from your transaction account to your savings account to make sure that regular contributions keep coming into your savings account because high interest accounts calculate their interest daily. That means that each day or each week you increase your balance, you will increase your interest earned, and in turn increase your compounding interest.
Goal 4 – Consider a high interest savings account
There are a number of ways to save and your situation will dictate the savings goal which is right for you. However, it is worth considering making a high interest savings account part of your plan for 2010. After record rate cuts and low interest rates following the global financial crisis, interest rates are now on their way up again. As a result, so too are the interest rates offered on high interest savings accounts as banks base the standard variable rate they offer on your savings. Because it’s easy to set up a regular transfer of funds to a savings account each week, but it’s even easier if those funds earn you a great interest rate.
The most important thing though, is to just start working towards being financially secure. If you have debt, credit card or other such, and don’t have adequate savings then you should really consider working to incorporate one of these goals depending on your situation. Pick the one that most applies to your financial situation and create SMART guidelines to help you achieve your goal!
Fred Schebesta writes for Savings Account Finder, where he helps people to save money and compare savings accounts
{ 11 comments… read them below or add one }
Savings goals is something I want to continue in this new year, I am working on continuing to add to my 10 yr investing fund where I have set up an automatic transfer each month. I also have a money market account set up where I put side savings for a vacation.
Craig´s last blog ..When it Snows, it Snows Money
Sounds awesome! There are so many more options to save these days than 10-15 years ago.
Getting on track with slashing spending is first, then paying off high interest debt, then saving for the future. My opinion only!
John DeFlumeri Jr
John DeFlumeri Jr´s last blog ..Podcast* "Gasoline Prices Going Crazy Again!"
Hey, go with what works for you! They are all great goals.
Great post! My goal is to make regular retirement savings – max out Roth IRA. I have ~$16,000 in student loans but they have such favorable terms (0% interest rate) that I’m not in any rush to pay those off.
0% interest? That’s free money! We have a car loan at 0.9% that we’re in no rush to pay off. We have better things to do with the money.
Great saving tips. I think getting out of debt is extremely important, but I also think that saving on a regular basis is also very important. What I do and what I tell others to do on http://financialsecrets101.com is to automate their savings by setting up automatic deposits into their online savings accounts. This helps to eliminate human error in forgetting about it. I personally put about 70$ per week into my savings for different short term expenses and emergencies.
thanks for the post. Look forward to hearing more from you.
Definately key to slash your costs and earn more than you spend. You aren’t going to get far in your personal financial situation without that in place.
If there’s more cash going out than coming in then you’re in debt. That’s that!
I am big on making the most out of every dollar that comes in. Each person has a different financial situation, but for us, we live simply, eat well for less and our goals are to pay off our homeloan quickly and then build assets for our retirement.
Big plans ahead, but you have to start somewhere. If that means saving $10 a week to start with, then that is what we can do. There are thousands of ways to save money, the trick is how to use what you get wisely. Do you invest, pay off debt, simply save?
My blog http://debtfreein5.blogspot.com/ is all about making and saving money and the methods we are using to pay off our home in five years.
MoneyMagnetMummy´s last blog ..Imaginative Ways to Save Money
There’s definitely no one plan that is right for everyone. I like that you understand that all goals start somewhere. When my wife and I went to one income extra savings were cut down a lot! But we still make sure to transfer something to savings, even if it’s a small amount.
{ 3 trackbacks }