Since April is Money Month, it's a great time to take stock of your current financial situation and reevaluate your savings strategies. Most families don't have enough saved to last more than a month. Don't let that be you! Creating financial goals will not only help build your emergency fund, it will take the guesswork out of saving and give you peace of mind.
The RetailMeNot Financial Literacy Month survey finds only 1 in 2 people are confident in their knowledge or understanding of personal finances.
- 1 in 5 (20%) people have no savings
- Of those who have money put away, 1 in 4 (25%) do not know how much is in his or her savings account
- More than 9 in 10 (92%) people believe parents should be responsible for teaching children financial lessons
3 Simple Steps to Take:
1. Take Stock
You can't very well get to where you're going if you don't know where you are. Before you really start to move ahead financially, it's important to get a clear understanding of your current financial picture. This financial picture serves as a benchmark for evaluating progress towards your goals, and it can help shed light on areas you may want to improve.
The best way to do this is to calculate your net worth. Creating a net worth statement is much easier than you might think. In simple terms, it's what you own minus what you owe.
Once you've calculated your household net worth, you'll easily be able to update it on a regular basis (we suggest quarterly) to track your household's financial progress.
2. Create Goals
Families frequently lose sight of the big picture because they're distracted by more urgent, compelling ways to spend their money. Is your spending in line with your financial goals and your family's values? (See Create a Family Mission Statement) Don't let things like lunches out or a salon pedicure habit get in the way of funding your child's college education. Realize that when you cut back in certain areas, you will be able to apply your savings towards more important things such as paying off debt, building savings, or achieving your goals.
3. Put Savings on Autopilot
The old “pay yourself first” strategy really works. Finding easy ways to put your finances on autopilot not only makes it harder for you to cheat, it takes the worry out of budgeting. Knowing your finances are taking care of themselves is a great way to gain financial peace of mind.
After you've crunched the numbers and know what you need to be doing with your money, automate the process as much as you can. Doing so limits the likelihood that you'll cheat or fall off the financial bandwagon. Here are some suggestions:
- Have your employer take retirement contributions out of your paycheck automatically. If you don't see it, chances are you won't miss it.
- Set up a regular monthly deposit from your regular checking account directly into a savings account that serves as your emergency fund.
- For fun money, put you and your spouse on a strict monthly allowance. Cash only is great, but you can also try a prepaid credit or debit card. What's not spent can be carried over to the next month, but when it's gone, it's gone.
- Use your bank's online bill paying feature to help organize your finances. Not only do you eliminate the time it takes to write out a check to mail, you save money on postage.
Want to do more? Check out our Financial Success Checklist.
This post is sponsored by RetailMeNot but all opinions are my own.