This America Saves Week, set some time aside to see if your savings plan is working for you.
Whether you want to refine your existing plan or you’re starting from scratch, Bank Midwest is here to help because saving in the present is essential for success in the future.
1. Develop The Right Mindset
Saving money is tough, especially if you haven’t been a serious saver in the past. But if you develop the right mindset, you’ll put yourself in a better position to meet your ambitions.
Start by making small adjustments to your lifestyle. Brew your own coffee at home, prepare meals at the beginning of the week and cut back on shopping sprees. Cutting a cup of coffee from your daily routine may not seem like much at first, but that $4 or so starts to add up weekly and then monthly.
“Save because you have goals you want to meet.”
Remind yourself that saying “No” in the present affords you the opportunity to say “Yes” to a future endeavor, like a vacation. Don’t just save because you’ve been told to – save because you have goals you want to meet.
2. Create Savings Goals
As part of the first phase of your plan, create savings goals. Break up your ambitions into three savings buckets: short-, medium-, and long-term. Try to include as many goals as possible so you’re always working toward crossing an item off your list.
Short-term savings ambitions are those you can achieve in two years or less. Examples may include going on a week-long summer vacation, buying a new car in the fall or purchasing a new phone when it’s released.
If you’re someone who struggles to stay on track, creating a list of short-term goals is helpful because you can set attainable targets and build confidence.
Medium-term savings goals represent ambitions you need more than two years to meet. If you’re a 20-something year old, this savings bucket might include a wedding, buying a home and paying off student loans. If you’re 40 or 50 years old, a mid-term goal might be paying off that 30-year mortgage.
For most readers, retirement represents a long-term savings goal because it’s still many years away. But just because it might be decades until you retire doesn’t mean you can ignore this important long-term goal.
Start saving for retirement now by taking setting aside a portion of your paycheck into a 401(k) and an Individual Retirement Account. The sooner you begin to save for retirement, the more money you’ll have in the future, allowing you to comfortably retire.
3. Utilize the right savings tools
If you think you can set aside money under the mattress or in a checking account, think again. You need to put your cash in the appropriate savings vehicle so it can earn interest and grow over time.
Your three types of goals should correspond to a particular savings tool. Let’s go over the products Bank Midwest offers so you can make the most of your savings:
If you need a simple way to set aside money, a personal savings account is right for you. A variable interest rate ensures that your money grows over time until you reach your savings goal.
Certificate of Deposit
If you need a savings tool that offers a higher interest rate, set aside money in a Certificate of Deposit. CDs don’t have monthly fees or put your money at risk, making them an ideal tool to help you meet savings goals months or years from now. Each CD also has a certain term life ranging from three months to five years. Longer term CDs offer higher interest rates.
CDs are viable savings tools to help you meet mid- and long-term savings goals.
Open a 401(k) retirement account at work to get a jump start on retirement planning. The earlier you start setting aside money and investing money, the more comfortable your retirement years will be.
Employers typically make matching contributions for the money you save. For example, employers may match 100 percent of contributions up to 3 percent of your annual income. Talk with your company’s human resources representative to find out the specifics of your employer’s retirement package.
Individual Retirement Account
In addition to a 401(k), having an IRA is a smart financial move. You must open a Traditional or Roth IRA on your own. With an IRA, you can save more money if you max out your 401(k). They also come with a host of tax benefits – Roth IRA withdrawals aren’t taxed, for instance.
Don’t limit yourself to one or two savings vehicles. Choose the tools that will help you meet all of your short- to long-term savings goals.
4. Track and Reward Yourself
Review your various savings accounts to ensure you’re still on track to meet targets. If not, adjust accordingly to get back on track.
Additionally, don’t hesitate to reward yourself on occasion. When you hit a particular goal, reward yourself and then continue on toward reaching the next target.
America Saves Week is a reminder that you can save money, no matter your annual income. Set goals and use the right savings tools to help you prepare for the short- and long-term future.
Contact Bank Midwest today for more information on our savings products.