Do you have a good savings strategy?

How can you create a successful savings strategy? Good savings habits can be tricky to make and stick to, but they are important for financial independence. If you’re unsure how to start, here are five ways you can improve your savings plan. These are designed to help you manage your money with confidence!

Create a rainy day fund

A rainy day or emergency fund is a critical part of establishing a good savings strategy. It’s always a good idea to have backup funds tucked away in case of a sudden need for a large amount of cash. At some point, everyone encounters a situation where they are facing a big, unexpected expense. For many people, this can be financially stressful. This is where an emergency fund comes in handy. 

This is an account you add small bits of money to on a regular basis. You don’t need to contribute huge deposits, because you don’t want to feel stressed over an account that is meant to help you reduce financial anxiety! You can examine your current situation to decide on what amount you can comfortably contribute, and on what schedule. Then, if a sudden emergency strikes, you will have your savings ready to lighten the strain. Unfortunately, we can’t predict when our pet will need emergency vet care, or when our car will quit on us. But knowing you have the savings to deal with these situations is a major benefit!

Consider using the 50/30/20 rule

The 50/30/20 method is an effective way to manage your finances. It divides your income into your needs, your wants, and your savings. According to this plan, 50 per cent of your income should go towards expenses you need to live, such as housing costs, utilities, and groceries. 30 per cent can go towards your wants, like entertainment or unnecessary housing upgrades. Finally, 20 per cent should go straight to a savings account! This is to help you build up a good savings foundation for the future. Whether you want to take a vacation, complete home renovations, or have children, for example, these are all future expenses you should be saving for now. 

If you aren’t able to contribute a full 20 per cent of your income to a savings account right now, that’s okay. Everyone’s finances are different, and this might not be a realistic number for you at this time. Instead, add what you can, and work your way up from there.

Assign specific goals to your savings

It can be hard to feel the motivation to save money when you don’t have anything in mind that you’re working toward. In fact, many people are tempted to spend their savings when they don’t know what they should be doing with them. It’s much easier to save money when you have something you are saving for. This gives you a clear, measurable goal, as opposed to what can feel like putting money away for no purpose. If you have a certain purchase you want to make, think about that when you are putting your money away. This could be a new house, a big trip, or a child’s post-secondary education. These are tangible goals that will help you stay focused on saving up, instead of spending money.

Wait before making big purchases

Instant gratification is something we all crave. Unfortunately, it can also have a negative effect on your finances! It’s super easy to make impulse purchases on items you don’t need, which can be especially damaging when they end up being large expenses. A good savings tip is to force yourself to hold off on big purchases. If you see something you want to buy, take a step back. Think carefully about whether you need this item, if you can afford it, and if it will be put to good use. Try to wait at least 24 hours before going back and completing the purchase. Often, once we take a moment to think, we realize we don’t need the extra expense right now.

Have any concerns? Contact a broker

If you’re unsure about your savings, we recommend reaching out to a mortgage broker. This is extra important for home owners who are struggling with their finances and need an extra boost. Money management can be hard, and sometimes we fall on tricky times. Contacting a broker is your best path towards financial freedom and confidence. We can meet with you to chat about your current savings, expenses, and future goals. You can work with a broker to create a personalized plan that suits you and will help you move forward.

Creating good saving habits is a challenge, and maintaining them can be even more difficult. However, remember to take advantage of mortgage professionals who are on your side! It’s much easier to have confidence in your finances when you have professional guidance backing you up.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.