Dreams. We all have them. But often what distinguishes those who achieve them from those who do not is simply a plan of action. When it comes to life goals involving money, it is no different.
Step One: Make a decision to work towards financial wellness: Lay the foundation for your dreams. It all begins with understanding your monthly take-home income, and where that money is currently going. In other words, budgeting.
Just as a business cannot operate successfully without knowing its revenues and expenses, it's difficult to be successful financially without knowing how much money came in and how much went out of your bank accounts. While this can seem like a daunting task, free online tools available today can make it much easier. You can also simply use Microsoft Excel or pencil and paper if you prefer to. This process will help you identify how much you can contribute to your goals each month without running out of money to pay your bills, and it will also help you identify areas where you are spending too much.
Step Two: Create A Savings Goal & Dream: Next, it's time to set a monthly contribution towards your dream. Just make sure the money is being set aside in a separate account from the one in which you get direct deposits and pay bills. Its consistency that's important here, not the amount of your contribution. Even if you have to start your contribution at $25/month, this contribution over time will begin to build a balance which will help encourage you to do even more.
Its very helpful to automate your progress by setting up an automatic transfer from your checking to another account the same day each month. You can also set up a direct contribution to this account from your payroll. Don't leave it to yourself to try to remember to make the contribution, or to make it at the end of the month with "whatever is left". Pay yourself first by transferring to your savings account and automating the transfers.
Step Three: Harness the Power of Compounding Interest: While consistent contributions to your savings goals is the most important factor, as rates continue to rise and you begin to save, the Annual Percentage Yield (APY) of your accounts is an increasingly important factor. Think about utilizing Money Market Accounts or Term Certificate Accounts to turbocharge your savings.
A Money Market account is a liquid savings account with a higher rate of return, and the APY tends to fluctuate with the market. They sometimes have features like the ability to write checks. They are typically insured just as a savings account is (TowpathCU's Money Market account, for example, is insured up to $250,000 per account by American Share Insurance).
With a Term Certificate, you earn a fixed rate of return for a set period of time, but you may have to pay a penalty if you withdraw the funds early. These accounts are also called "CDs". These accounts will typically offer the highest APYs as you are 'committing' to leave the funds in the account for a specified period of time.
Whether its saving for your first home, your next vehicle, or any other dreams you may have, TowpathCU is here to help. As a not-for-profit local financial institution, TowpathCU exists to help you save more and borrow for less. Dollars deposited and loan from TowpathCU create local jobs and return dollars directly into our community.