If you’re reading this article it’s clear that you’re not one of the three lucky Powerball winners that live in Florida, California or Tennessee and that will split the $1.5 billion Powerball lottery. Well, in the words of former Pres. Bill Clinton, we feel your pain. We understand how wonderful it would have been to pocket all those winnings and the financial freedom they would have provided. Now that you’ve put away those dreams of buying a $250,000 sports car, a 75-foot yacht or that million-dollar mansion it’s time to think about your financial future and there are eight financial tips that could help.
When you’re planning for retirement then waiting in line to buy Powerball tickets can be a lot more tempting than instituting a savings plan. But if you’re like the average American, who according to an article in MarketWatch.com have less than $1000 in an emergency savings account and $70,000 in debt, what should you do? First, be realistic. The odds of ever winning the Powerball lottery are so small as to be insignificant. You probably find time in your busy week to visit friends and family members, to work out, and to pursue a hobby but you also need to take time out for yourself. Set a date and time to take stock of your financial position. Set aside two hours to review your account balances, how much you’re paying in interest on your auto loan, how much you owe on credit cards and how much you’re spending each month. This doesn’t have to be painful either. There are a number of smartphone apps and websites that will help you do this.
Make concrete goals
Now that you know how much money you have, how much debt you’re in and how much is in your savings account you need to next make some concrete goals. The first should be to save for an emergency fund. According to the data published on Bankrate, emergency fund savings are still down despite the fact that people are earning more money. You need to start working on this fund if you want your finances to be secure. Financial experts say you should have enough in that fund to cover six months’ living expenses. If that doesn’t seem realistic try for at least three months worth. Your second goal should be to save for retirement and third, to pay off whatever high-interest debt you have.
How to get there
As an example, let’s take that emergency savings fund. Suppose you set a goal of having $1500 in it. In this case, you could set a goal of saving $100 a month, which would get you to that $1500 goal in just 15 months. Or you could have an even smaller goal like saving those two dollars it would’ve cost you to buy a Powerball ticket. If you’re the type of person that buys several lottery tickets a day you may actually be spending $100 a month. Quit doing this and that’s an extra hundred dollars a month that could go towards your financial goals – whether it’s to build up your savings, pay off debt or save for retirement.
Just because you’ve given up on the Powerball lottery doesn’t mean you have to give up on your dreams. In fact, continually visualizing your goal, whether it’s to save up for a car, retire comfortably or send your kids to college, is one of the best ways to keep on track. Scientists have found that if you make a spending plan and then envision what it is you want to accomplish down the line stimulates the identical part of your brain that thinking about winning the lottery does. What motivates people is emotion – the vision – and not lectures.
We understand it’s hard to earn much interest on your savings these days although it may become a bit easier since the Federal Reserve Bank has increased the base interest rate. However, you need to do as much as you can to maximize your savings. Take a few minutes to compare the interest rates offered by several of your local banks and credit unions. Be sure to also check out the interest rates offered by reputable online banks such as Ally Bank, Synchrony and Barclays. Both Synchrony and Barclays are currently offering 1.05% interest on their virtual bank accounts, which is probably better than you will be able to do with a local credit union or bank. Both are FDIC insured and charge no fees if you keep a balance of at least $30.
If you’re willing to take a bit more of a risk you might contact an online brokerage and invest in an index fund, which will be relatively safe and give you a better return than traditional savings accounts. You can get a good idea as to which funds you might want to invest in on websites like Magnifymymoney.com.
Cut down on your spending
By far the easiest of the eight financial tips for achieving your savings goal is by cutting down on your spending. Once you’ve analyzed it as suggested earlier in this article you should be able to find ways where you can cut down on things. The categories where most people can reduce their budgets is in food, entertainment, and clothing. But, of course, you may find areas beyond this where you could cut costs and use the money to fund your savings goal.
Last but certainly not least, try to figure out a way to increase your earnings. There is nothing wrong with arranging a meeting with your boss where you ask questions such as, “What could I do to earn more? Do I need to acquire a new skill, take some classes or take on more work?” Try this and you might be surprised to learn that your boss would be happy to help you develop a strategy for increasing your earnings. According to the data revealed by BLS.gov, 4.9% of workers are holding multiple jobs. If you need to earn more, this is something that you can do to make your finances more secure.
Stay the course
Whatever is your goal and whatever plan you create to attain it the important thing is to stick to the course you have started. Never forget the old adage that big oak trees from little acorns grow. Just saving $25 or $30 a week for 35 or 40 years will end up funding a very nice retirement – if you do that every week without fail. Working to build a nice retirement is just not that complicated