As we prepare to kick off a new year, and a new decade, are you thinking about any major financial goals?
The beginning of the year can be a great time to reset, reorganize, and dedicate yourself to some personal pursuit. You certainly won’t be alone. According to Fidelity Investments, 67% of Americans are considering a financial resolution for the new year.
So, how do you become one of the fortunate people to actually achieve that ambitious financial goal? Well, you don’t need luck, you need an actionable plan that starts small and builds to something significant over time. If you’re looking to save for a new car, a home, or some other sizable purchase, consider the Top 10 Ways to Save for a Large Purchase.
1. Create a dedicated savings account
Doing this will help to stay organized and track progress toward your goals. You will always know where you stand, and how much there is left to go, staying honest with yourself and avoiding the trap of cutting corners.
Another consideration is removing friction from achieving your goals, like remembering to set aside savings every month. Take advantage of high yield savings rewards accounts such as the one offered by the Rhove app.
Be as specific and realistic as possible with your goals, setting a dollar amount and an end date. Try breaking your larger goals into smaller, realistic, and specific goals. So, rather than saying you want to save enough to cover a down payment on a home, commit to saving $25,000 to cover a 10% down payment on a $250,000 home.
Even better, break down your goals into even smaller, more manageable chunks, like monthly or weekly milestones. Small wins will give you a feeling of success and ensure you can course correct if things aren’t going as planned.
Write out your plan. That’ll make it feel more official, and you’ll be less likely to break this “contract” with yourself. Also, stress test the plan to determine how, say, a $400 car repair would affect it.
3. Record your expenses
Be aware of how your disposable income is being spent. Know the breakdown among dining, transportation, entertainment, and other major categories.
This is a great way to inform your planning and make any adjustments along the way toward your goal.
4. Spend within your means
Once you figure out how much of your income can be set aside for certain categories, like entertainment and indulgence, stay within that limit. Avoid impulse purchases by reminding yourself of the ultimate goal and why you’re pursuing it. As a rule of thumb we’d recommend keeping housing costs below 30% of your take-home income.
Simply making a list to go shopping will help you avoid impulse buys. And comparison shopping will lead to savings on everyday items.
Prioritizing is a great way to ensure you stay within your means. With a long-term savings goal like a down payment for homeownership, it’s unrealistic to avoid treating yourself every once in a while, but it’s also possible to do so within the confines of a plan.
5. Don’t splurge with your tax refund
Remember, if you get a tax refund in the spring, that’s your money. You were just lending it to the government interest-free. So, don’t spend it like you’ve just been handed a windfall. Stash this nest egg away to bolster your savings.
The same applies to work bonuses and other cash inflows.
6. Temptation bundling
Some behavioral economists recommend coupling an undesirable activity (like sifting through your credit card statements to monitor spending habits) with a reward like ice cream or your favorite pizza. You know yourself, be creative and you’ll form good habits in no time.
7. Be smart about everyday spending habits
You’ve probably heard it before… pack your own lunch or make coffee at home to save money. It’s often repeated because they’re very real solutions. Also, consider signing up for loyalty rewards programs and use coupons for grocery items.
8. Alternative savings vehicles
Think beyond the traditional low-yield savings account. Even a fraction of a percentage point can significantly influence your savings.
Rhove, for one, helps people save for the long term through an easy-to-use mobile app. Better yet, when you live at a property that offers Rhove you can make money on rent, earning up to 2.5% cash back every month. No fees, and no hidden costs.
There are a ton of options out there in this day and age. Do your own research and find the solution that works best for you.
We hope these pointers help you make 2020 your best year for saving yet. Do you have your own favorite method for saving long-term? Drop us a line and we may share with our readers!
At Rhove, we believe people have the right to invest in their home. Our mission is to expand access and opportunity for everyone to own in their community. If you’re interested in learning more about Rhove, check out our website. If you’re in market for a new financial tool, check out the Rhove app.