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