Throughout your life, you will be faced with many decisions about saving and spending. Your goals can vary from smaller purchases such as a new smartphone to larger purchases, such as a car or a house to long-term savings for retirement and any unknowns. There are some life events that you can plan and save for, like higher education or starting a family, but it’s impossible to foresee unplanned expenses. That’s what makes saving important — so you’ll be prepared for any type of expense by having money set aside.
Many Americans spend more than they save, and nearly one in five people are saving less than 5 percent of their income (according to a 2015 Bankrate survey). If you’re reluctant to start saving or believe it isn’t possible, think of it as a path to exciting opportunities rather than a burden. Chances are you’ll need the funds for unexpected situations throughout your lifetime, good and bad. Here are some basic steps to get you started.
Real-life reasons to save are good motivators. After you have secured an emergency fund and have enough saved to support yourself for three to six months, you can start saving for what you really want. Think about short-term (current month or year purchases) and long-term goals (for important life events and big expenses), using this SMART guideline:
SPECIFIC goals inspire. Setting a clear goal will help you focus on saving for it.
MEASURABLE goals let you see the real task at hand. By using real numbers, you can measure your progress along the way.
ATTAINABLE goals pay off. When setting your goal, ensure that it is realistic and within your reach.
RELEVANT goals make good sense. Set a goal only if you know it will be meaningful in the long run.
TIME-RELATED goals have a real deadline. Setting a time frame for your goal will help you stay committed to reaching it.