Dear Olga,
What is a good way to maximize savings?
Thanks,
May
Dear May,
The best way to maximize your savings is to build your savings goals into your monthly budget and set intentions for your savings.
By building your savings goals into your budget, you will be paying yourself first each pay period and less likely to borrow from yourself in the future. If you're not using a budget already, the first step would be to review your income and spending. You can find a budget template in the resources section of my website. A budget will allow you to see what you're working with today. Knowing what you have leftover to save each month, will allow you to create a strategy for your savings.
Now that you know how much you can set aside each month, set intentions for your savings. Creating categories for your savings will help you understand why you're making an effort to save. This will motivate you to continue saving when it's the hardest to stick to your goals.
If you are just starting to work on your savings, first focus on building an emergency fund. A good place to start is setting aside 6 months of living expenses (rent, utilities, food, phone, etc).
If you're looking to diversify your savings, my most recent "Dear Olga" columns covered annuities and 401k accounts. The answers in these posts explore both topics in greater detail and can give you some ideas how to continue building your savings.
Here are my favorite money tips that can help you save some extra cash on the side:
$5 purge - check your wallet once a week, save all $5 bills in a jar
52 week challenge - save the number of dollars for each week of the year. 1st week you save $1, 2nd week you save $2, and so on. If you stick to this challenge for a whole year, you'll save $1,378!
The key to creating a savings plan that you can stick to is to make it challenging enough that it encourages you to keep going, but at the same time it's not so aggressive that it's impossible to stick to every month.
Also, consider a reward system that kicks in every time you achieve a savings goal. This will encourage you to keep working towards any goals you're still working on and any future goals you set for yourself.
I hope this gives you some ideas on how to maximize your savings. Feel free to write in again, we can do a follow-up post about any additional questions you may have.
Best of luck!
Olga
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