9 Step-By-Step Savings Goals to Set in Your Early Years

In my career, I have worked with people on money management and budgeting, both young and old. In this experience, I can say that the most popular discrepancy I have observed is folks not following a financial savings plan in their early 20’s; in fact, most folks just “wing it”. If you are ready to learn the steps to your own “saving grace”, read on. The following is a practical guide on money management and saving. Follow these steps and you will never go wrong.

-Save for a rainy day
First, you set aside at least $1,000 for a “rainy day”. This is your emergency fund; the money you spend for the “whens” in life. For instance, when your car breaks down, you need a new computer or when that refrigerator dies. Any time you access your emergency fund, restore it as quickly as possible.

-Save for a job loss
Put at least three months worth of your gross (pre-tax) income into savings; although, having six months is better. This savings is money you may need to tap into in order to survive during a layoff or termination, so keep it in a high yield savings account and accessible if you need it.

-Save for a car…in cash
Unless you qualify a 0 percent interest rate, a car is a hulking drain on your budget. Drive a car that is inexpensive and fits your lifestyle, but put laser beam focus on where you live, not what you drive. Cars depreciate in value, making them a lousy investment the moment you drive out of the car lot. You are spending money on an investment that is losing money when you pay interest on a car loan. Buy used, and buy in cash. Not having a car payment each month frees up a lot more money to save for other things, that are much better investments.

-Save for a house
Typically, an affordable house will be about 4 times your gross (pre-tax) income. When figuring how much you need to save for a house, consider that the minimum down payment on an FHA loan is 3.5 percent of the sales price, and closing costs will be approximately 4 percent of the sales price. This means you need to have at least 7 percent of the amount of the property in savings. More is better.

-Save for home improvements
Once you have bought that house, save up for home improvements. On average, maintaining a home will cost 1 percent of its market value each year. Budget for that, and then tack on some money to replace floors, paint, add a deck or upgrade a fence. Your home is your best investment, and improvements add value and equity once it’s time to move.

-Save for high dollar items
Save up for computers, televisions, furniture and appliances; those high dollar items we all want and usually finance. Avoid succumbing to the siren song of credit.

-Open a CD (Certificate of Deposit)
A CD is a short term, high yield account that is a excellent vehicle for saving when it comes to short-term (a year or less) goals.

-Open a retirement fund
Even if your employer offers a retirement fund that you subscribe to, open up a Roth IRA or traditional IRA and start saving for retirement. Watching that money grow over time can mean tearing off the shackles of “the man” at 45 instead of 65.

-Save for vacations
All work and no play makes for a dull life. Remember to play as hard as you work, but don’t finance a fabulous time. Save up for vacations using a high yield account or CD.

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