Make Saving a Priority – Be Consistent and Have a Plan
What are your financial priorities?
If you’re like most people, you probably pay the mortgage or rent first every month. Then you may take care of utilities, insurance, and other fixed expenses. But what happens with the rest of your money?
Put saving at the top of your to-do list every month. You are the only one who can make it a priority to pay yourself first. Hey, you’re worth it!
Make sure you’re not spending more than you earn every month. See where can you cut back your spending and apply the extra funds to your savings.
Hint: Consider saving automatically by setting up an auto-deposit so that a portion of each paycheck goes into your savings account. It’s a great way to put saving first every month. Make a commitment not to dip into your savings account for anything other than your short- or long-term goals.
Create a savings plan
Having a savings plan will help you prioritize saving. You’ll know how much you need to save to reach your goals, and how long you have to save it.
- The first step to a creating a savings plan is to write down your financial goals.
- Next, write down the number of months or years you wish to take to reach each goal.
- Then, figure out how much each of your goals will cost. This is the amount you will need to save. Calculate how much you will need to save each month in order to reach each goal.
- For long-term goals, it’s important to account for inflation, which averages about 3 percent per year.
- Keep track of your savings progress. Watching the savings add up can help you stay motivated. Make any necessary adjustments to your goals and your budget as your priorities change.
Start now – your savings will earn more
The longer you wait to start saving, the harder it can be to reach your goals.
The power of compound interest makes it possible to earn exponentially more money on your savings by starting today, rather than waiting until some day down the road.
Compound interest allows you to earn interest not only on your initial deposits, but also on the interest your money accumulates over time. Compound interest is added to the original amount you deposited (the “principal”) automatically, and additional interest payments are figured on the whole sum: principal plus interest. So, in effect, you wind up earning interest on the interest. The sooner you start, the more you can benefit from compounding interest.
My Money Goals
Want to buy a house? Reduce debt? Scroll through the columns below and select your goal to create a plan.
- Please choose from the other list
This site is for education purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.