Being able to sock away money 'for a rainy day' is an essential part of personal finance. Being able to do so will allow you to carry out some very important financially-based life events over time, such as buying a home or sending your children to college. Yet it is oftentimes easier said than done. Sometimes, short-term desires usurp long-term goals. Other times, life's various emergencies drive a wedge between you and your ability to save. It's almost enough to make a person throw his or her hands up and give up at times.
However, there are a few smart strategies that can be implemented in order to stay on the path to savings, even as various things in life threaten to derail you. These strategies mainly take discipline and patience in order to yield fruit, but the results that await you at the end of the road make implementing them worth all of the effort.
Use Your Bank as an Ally
More than likely, your money is linked to a financial institution of some kind, be it a bank or a credit union. If so, there may be a tendency to view the bank simply as an ATM. Yet a good bank offers a wide host of tools and programs that can help you save cash both in the short-term and in the long run. Opening up a savings or a money market account are the bank services that may readily come to mind, and they can work just as long as you stay focused enough to keep the funds there as opposed to withdrawing them for anything superfluous.
Banks are also a great source to look at if you are looking to finance a big-ticket item, such as a car. You may be able to get a better interest rate on these types of purchases by going through your bank, which will help you save a nice chunk of change over the duration of the purchase period.
Guard Your Credit Score
A good credit score is not just a number. It is a symbol of terrific purchasing power. The higher the credit score, the easier it is for lenders to work with you. This is because a high credit score lets lenders know they can trust that you'll pay things back in a timely, efficient manner, and that you won't put them in a bad debt situation where collection agencies and other such forms of nastiness may be involved.
While a good credit score helps lenders determine your creditworthiness, a good credit score oftentimes leads to substantially more favorable interest rates. This in turn means that you'll be able to experience greater long-term savings. When used in conjunction with a bank program, a high credit score can be a rather effective money-saving one-two punch.
401(k) and IRAs
If there's a knock on saving through your bank, is that it doesn't yield strong investment returns on the money that you sock away. It is a legitimate concern, and it's one that almost acts as a trade-off in exchange for you being able to access your savings at any time.
401(k) and IRA programs don't have these issues. Both programs are built for people to keep money invested locked up for several years, where it can grow at a significantly greater rate in comparison to what a bank can offer. Investing in these programs is very simple, and is usually as easy as designating a part of your paycheck to a program before it even hits your bank account. The trade off to this program is that you can't touch the funds without a huge penalty until you reach 59 1/2 (although there are certain scenarios that allow you to 'borrow' from the investment via a loan). However, this wrinkle provides built-in discipline by prohibiting people from drawing from their well of savings superfluously, which oftentimes can lead to troubles.
Do All the Little Things
While a healthy chunk of money-saving techniques involves keeping an eye on the long-term, there are plenty of smaller, more immediate things that you can do to create savings out of your day to day life. Some of these tactics may not seem to be a huge deal on their own, but they can make a substantial impact when viewed collectively.
One of the best ways to experience this kind of small-scale savings is by taking a trip to the grocery store. Deploying strategies such as comparison shopping, coupon cutting, and perusing weekly mailers in order to pinpoint sales items will help dramatically cut down on your weekly grocery bill. What's more, if you take the money you save and sock it away at your bank, you'll be better prepared for the emergency situations that inevitably crop up in life.
Keeping tabs on your change can also be a surprisingly solid tactic to save money. Even in this age of e-commerce and debit card transactions, you'll still find yourself accumulating coins from the times where you do pay in cash. It's wise to store this loose change in a jar or even an old-fashioned piggy bank. When it gets filled, take it down to the bank and put it into your savings account.
Provide a Purpose for Saving Money
It becomes a lot easier to save money if you give yourself a clear-cut reason why you're saving funds in the first place. This tactic is not different than, say, saving allowance money to get a comic book or ice cream as a kid. The only thing that's really changed is the end goal. If you earmark your savings to be able to take that vacation you've always wanted, it will be much easier for you to follow through with keeping your money socked away.
Don't be Discouraged
Ultimately, the most important step you can take in order to save money is not get down when things don't go as planned. Life dictates that you'll have some financial ups and downs; the key to saving your money is how you react to these types of trials. If you don't allow life's inevitabilities to derail your desire to reach your long-term financial goals, your bank account will turn out just fine in the end.