One of the common top concerns that I hear from individuals is how they're not able to save. A consistent savings plan helps you build a solid financial foundation.
But where do you begin? Here are seven ways to help you grow your account balances. Your strategy starts with your spending plan. (For more, see: 3 Smart Ways to Update Your Investment Plan.)
1. Create a budget (or spending plan)
Living beneath your means is the first step to building wealth. In addition to living beneath your means, it is equally important to identify where your money is being spent. By tracking your spending you can identify areas where you can potentially redirect money to fund your goals. Your spending plan should include goals for savings including your 401(k) and/or IRA contributions.
2. Set up a savings plan
Setting up a savings plan is key to building a solid financial foundation. You should keep at least three to six months living expenses in a liquid account such as an FDIC-insured savings account or money market for emergencies. Set a monthly amount to have transferred to your savings account.
You can also boost your savings by opening either a CD or an online FDIC-insured savings account.
3. Consider opening a CD
You may have goals where you want to fund but have a one- to five-year time horizon, such as saving for a car or down payment on a home. One of the best ways to increase your yield over a money market or savings account is to open an FDIC-insured CD. You can still keep funds fairly liquid. However, in order to get a higher yield, the account minimums on a CD are fairly high.
4. Consider opening an online FDIC-insured savings account
Typically, rates on online savings accounts are higher than traditional banks. It is a good idea to compare rates and terms. You can compare rates on websites such as www.nerdwallet.com or www.bankrate.com. (For related reading, see: 5 Emotional Mistakes That Hurt Your Financial Plans.)
Here are three ways to increase your 401(k) or IRA savings:
5. Maximize your contributions
Take advantage of your employer’s 401(k) or other employer-sponsored retirement plan by contributing the maximum you can to the plan. If you cannot contribute the maximum, just start with what you can afford and build from there. A good strategy is to increase your contribution each time you receive a raise until you reach the maximum contribution. If you receive bonuses, use part of them to contribute to an IRA.
6. Consolidate your retirement accounts
You should consider consolidating multiple IRAs and rolling over 401(k)s from previous employers. If you are no longer with the company, your money shouldn’t be there either. By consolidating into an IRA, it gives you more flexibility in terms of investment options and gives you a better picture of your portfolio.
7. Invest early and often
The younger you are when you start contributing to your retirement plans, the less you need to save. The key is to just start with what you can afford and contribute on a regular basis by setting up an automatic transfer from your account or paycheck to fund your IRA or 401(k).
You are in control of your financial future. Careful planning and a savings strategy can go a long way towards building a solid financial foundation and helping you achieve your long-term goals.