10 Creative Ways to Save Money on a Tight Budget

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When it comes to saving money, it can seem like an impossible task when you’re on a tight budget. But it doesn’t have to be! With a little creativity, you can find ways to save money without feeling deprived. Here are 10 creative ways to save money on a tight budget.

1. Make a budget and stick to it.

This might seem obvious, but it’s one of the best ways to save money. Once you have a budget in place, it will be easier to track your spending and stay on track with your savings goals.

2. Plan ahead for meals.

Meal planning is one of the best ways to save money on groceries. When you plan ahead and shop with a list, you’ll be less likely to make impulse purchases, which can add up quickly. Check out this article for tips on how to grocery shop on a budget or click here to find a nearby farmers market.

3. Shop second-hand.

You can find great deals on clothing, furniture, and even appliances by shopping second-hand. Thrift stores, garage sales, and online marketplaces like Craigslist and eBay are all great options for finding great deals.

4. Use coupons and discounts.

Coupons and discounts can help you save money on items you were planning to buy anyway. Look for coupons in the newspaper, online, and in store circulars.

5. Cancel unnecessary subscriptions and services.

If you’re on a tight budget, you may want to consider canceling any services or subscriptions that you don’t really need. This can include gym memberships, streaming services, and magazine subscriptions.

6. Cut back on entertainment costs.

Going out to the movies or to a restaurant can get expensive. Instead, look for free or low-cost entertainment options, like seeing a free movie in the park or having a picnic.

7. Take on a side-hustle.

If you have extra time, consider taking on a side-hustle. You can make money by doing things like freelancing, babysitting, dog walking, or even selling items on eBay or Etsy.

8. Reduce energy costs.

To save money on energy bills, turn off lights and electronics when you’re not using them and make sure your home is properly insulated. You can also look into getting a programmable thermostat to help you save even more.

9. Make your own gifts.

Instead of buying gifts for special occasions, try making your own. Homemade gifts are unique and thoughtful, and they can save you money in the long run.

10. Look for free or activities.

There are plenty of activities you can do that don’t cost a thing. Take a walk in the park, go to a free museum, or have a picnic in the backyard. Click here for more ideas.

Saving money on a tight budget can seem daunting, but it doesn’t have to be! With a little creativity, you can find ways to save money without feeling deprived. Try these tips and see how much you can save. 

And for those times when Life Happens, we’ve got you covered.

Advice for Long-term Investing During a Recession

Advice for Long-term Investing During a Recession

If you’ve just reached the point where you’re ready to start investing but find yourself dealing with an economic downturn, don’t be discouraged. Investing during a recession can be a challenging prospect, but for those with the right know-how and approach, it can also present a wealth of opportunities.

In this article, we will explore some of the key advice and strategies to keep in mind when investing during an economic downturn.

Focus On Investing For The Long Term

An important consideration is to take a cautious approach to investing during a recession. While it can be tempting to try and make quick profits by buying low and selling high, this approach can also be risky. Instead, beginner investors should focus on long-term investing strategies, looking for opportunities to buy high-quality stocks or other assets at a discounted price.

Consider The Unique Opportunity At Hand

One of the biggest advantages of investing during a recession is that it can be a good time to buy stocks. With many companies experiencing significant drops in their stock prices, there are often bargains to be had for savvy investors who are willing to take a long-term approach. However, it’s important to remember that stocks are riskier than bonds or other investments, so it’s important to do your research and choose companies or mutual funds with solid fundamentals and a strong track record of performance.

Don’t Obsess Over Your Portfolio’s Progress

Another key piece of advice for investing during a recession is to resist the urge to check your investments too often. While it can be tempting to obsessively monitor your portfolio in the hopes of spotting opportunities to buy or sell, this approach can often be counterproductive. Instead, focus on your long-term investment strategy and trust that your portfolio will rebound over time.

Make Sure You’re Using A Diverse Investment Strategy

It’s also important to regularly review your portfolio diversification and make changes as needed. Diversification is important because it helps reduce risk by spreading your assets across different types of investments. However, keep in mind that diversification doesn’t guarantee that all of your investments will perform well at the same time. 

Ultimately, investing during a recession requires a long-term perspective and a willingness to be patient. While it can be tempting to try and time the market or make quick profits, the most successful investors are those who focus on the fundamentals and invest for the long-term. If you can keep these principles in mind and maintain a disciplined approach, you may be able to take advantage of the opportunities presented by an economic downturn and come out ahead in the long run.

Of course, it’s important to remember that investing always involves some degree of risk, and there are no guarantees of success. However, by following the advice and strategies outlined in this article, you can position yourself to make informed decisions and weather the ups and downs of the market with confidence, even if you’re just getting started.

Top 5 Mistakes Made by Beginner Investors

As a beginner investor, it’s easy to get swept up in the excitement of investing in stocks, bonds, and other financial instruments. However, there are common mistakes that many new investors make that can hinder their success. Here are six common pitfalls to watch out for:

Neglecting Your Financial Foundation Before Investing

It’s important to make sure your finances are in good shape before investing. This means having an emergency savings account, paying off high-interest debt, and setting a budget. Without a solid financial footing, you may be more vulnerable to market downturns and economic challenges. In addition, it’s important to have a clear investment plan with specific goals and a timeline for achieving them.

Investing in Individual Stocks Without Proper Research and Knowledge

Many new investors are tempted to invest in individual stocks, especially those with a flashy name or promising potential. However, investing in individual stocks can be risky, especially if you don’t have the knowledge or experience to evaluate the company and current market properly. It’s better to invest in a diversified portfolio of stocks or seek advice from a financial professional. A diversified portfolio can reduce your risk and provide greater potential for long-term returns.

Making Investment Decisions Based On Emotions Rather Than Facts

Emotional investing can lead to impulsive and irrational actions. For example, if you’re feeling fearful after watching the news, you may sell off your stocks in a panic, even if market conditions and company fundamentals suggest that it’s not the right time to sell. To prevent emotional investing (or divesting), focus on the facts and carefully assess market conditions and company fundamentals. It’s also helpful to have a set of investment principles that guide decision-making, such as diversifying your portfolio and avoiding investments you don’t fully understand.

Leaving Money In An Account Without Actually Investing It

One common mistake that new investors make is putting money into an account but not investing it, like a retirement account. Just because the funds are in your account doesn’t mean they’ve been allocated to stock purchases. Make sure your funds are actually being invested, not just saved! Leaving money in a savings account or other low-risk, low-return investment can be another component of your long-term financial goals, but investments with higher returns have the potential to outpace inflation and maintain or even increase the purchasing power of your money.

Not Utilizing Available Resources And Tools To Make Informed Decisions

There are many resources and tools available to help beginner investors make informed decisions. These include financial news and analysis, online research tools, and educational materials. By using these resources, you can make informed decisions about where to invest your money and how to diversify your portfolio. Many financial professionals make great content available for free through newsletters, podcasts, and social media platforms. Take advantage of professional advice at no cost – just be careful when applying it to your unique situation.

Paying Excessive Fees Or Commissions Without Realizing The Impact On Returns

It’s important to know the costs and commissions associated with your investments. These can include trading fees, management fees, and other charges that eat away at your returns. Carefully review the fees and commissions associated with your investments and choose low-cost options whenever possible. For example, you can choose low-cost index funds or exchange-traded funds (ETFs) instead of actively managed mutual funds, which often have higher fees.

In conclusion, avoiding these common mistakes can help beginner investors achieve greater success in the stock market. By focusing on your financial foundation, diversifying your portfolio, making rational decisions, investing your money wisely, utilizing all of your resources and tools, and minimizing fees and commissions, you can improve your chances of reaching your financial goals.

Join the CashFurther community and take control of your financial future. With a wealth of resources and support from like-minded individuals, you’ll learn how to improve your credit score, budget wisely, and achieve financial stability.

How to Get Back on Track if You Blow Your Budget

It happens to everyone – sometimes spending spirals out of control, and before you know it, you’ve overshot your budget. This can happen due to an unavoidable increase like inflation in the cost of essential commodities or from uncontrolled impulse buying. But don’t worry – it’s always possible to reset and get back on track. Here’s how:

Don’t Be Too Hard on Yourself

It’s important to learn from your mistakes rather than dwelling on them. If you’re a first-time budgeter, it’s common to skip over details while preparing your budget, leading to overspending. But don’t let this lack of experience discourage you – take it as an opportunity to learn and improve for next time. Additionally, unexpected expenses can arise that are outside of your control. Don’t let these setbacks erode your confidence – instead, reflect on what you can do differently to improve your budgeting experience in the future.

Assess the Damage and Get a Clear Picture

Periodically review your budget to keep track of your spending and see if you’re staying within your guidelines. Take a detailed look at your budget and identify which areas caused you to overspend and by how much. It’s also helpful to note what has been working well for you. Then, dig into the specifics of why you overspent:

  • Was there an emergency you hadn’t budgeted for, such as a health issue, car repair, or home maintenance issue?
  • Are there recurring expenses you didn’t include in your budget, like a subscription service or gym membership?
  • Are there irregular expenses that come up annually or quarterly, such as insurance premiums or taxes?
  • Are you incurring penalties on your credit card or overdraft fees on your checking account?

Understanding the root causes of your overspending can help you determine if it was due to unavoidable expenses or if you simply made some poor spending choices that can be cut back on in the future. If you find that your income is not sufficient to cover your necessary expenses, it may be time to consider finding a new job that better aligns with your financial needs.

Revisit Your Budget and Make Any Necessary Adjustments

Once you’ve identified areas that need improvement, it’s time to revise your budget to better align with your financial goals. This may involve reducing expenses where possible and increase your savings to create a financial cushion for the future. The extent of your overspending will determine the corrective steps you need to take to get back on track. For minor indulgences, simply cutting back on spending in those areas may be sufficient. However, if you exceeded your budget by a large amount, you may need to take more drastic measures to return to your intended financial trajectory. Remember to also consider any necessary expenses that may have been overlooked in your initial budget.

Consider Shifting Your Financial Goals

As your circumstances and priorities change, your budget should also evolve to reflect your new goals. For example, if you’re focused on debt reduction, you’ll want to allocate more of your budget toward debt repayment. If you’re saving for a down payment on a home, you’ll need to budget accordingly. As time goes on, you may also want to increase your savings for retirement or your children’s education. Being intentional and proactive about your financial goals will help you stay on track.

Get back on track by building up savings and paying off debt. The key to financial recovery is to focus on savings, debt management, and investments. Building up your savings and paying off debt.

Succeeding in your financial goals will take discipline, research, and resilience – and that’s where the CashFurther community comes in.

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When and How to Review Your Budget

couple reviewing a budget

Budgeting is an important financial tool that allows you to track your income and expenses and make sure you are spending your money in a way that aligns with your financial goals. It’s important to review your budget regularly, at least once per month, in order to make sure it is still accurate and effective. Here are some steps you can follow to review your budget and make any necessary adjustments:

Compare Your Actual Spending To Your Planned Spending

After creating your budget, track your monthly spending in a spreadsheet or an app. This will allow you to see if you overspent, underspent, or stayed on budget for the month. If you overspent in any categories, you may need to cut back on those expenses in the future. If you underspent, you can consider allocating that extra money to other areas or saving it.

Assess New Expenses And Sources Of Income

Your income and expenses may change from month to month, so it’s important to consider these changes when creating your budget for the following month. Any changes in your lifestyle, such as moving to a new home, can impact your income or expenses and should be reflected in your budget.

Examine Your Financial Objectives

In addition to changes in income and expenses, your financial goals may also change over time. For example, if you recently paid off your debts, you may have more money available to allocate to other spending categories. Make sure to include your financial objectives in your budget.

Adapt Your Budget To Your Needs

Once you have a baseline for your monthly expenses, income, and financial objectives, you can make any necessary changes to your budget. This may involve reducing wasteful spending and shifting funds to different categories. If your financial situation has changed significantly, you may need to adjust the allocations for each spending category.

Find And Fix Budget Leaks

Analyzing your budget can also help you identify any “budget leaks” – hidden issues with your spending. To fix these leaks, you may need to cut back on your expenses further. For example, if you have been relying too heavily on credit cards or dipping into your savings account, you may need to switch to a cash-only budget, leave your credit card at home, or put your savings in a certificate of deposit (CD) to make it more difficult to access the money.

Review Your Budget Regularly

In order to increase your savings, manage your spending habits, and work towards your long-term goals, it’s important to review your budget on a regular basis. Some key times to review your budget include when your income changes, when your priorities change, or when you have made mistakes in your budgeting.

When reviewing your budget, it can be helpful to ask yourself some questions: What went well? What went wrong? And what can be done better? Reflect on the budget-friendly actions you’ve taken and consider any mistakes you may have made in the previous month. Think about what steps you can take to avoid making the same mistakes in the future.

Improving your budget is a process that takes time and effort, but it can help you improve your financial future. By tracking your spending, assessing your income and expenses, and making adjustments as needed, you can take control of your finances and work towards your financial goals. With the right tools and strategies, you can create a budget that works for you and helps you achieve your financial goals.

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Cutting Costs: What Not to Buy on a Budget

cutting costs

Inflation and the high cost of living can make it difficult for many people to make ends meet. In fact, research shows that about three out of five Americans live paycheck to paycheck, and many of these individuals have lost financial stability. This is especially true for those in the lower-income bracket, who are often looking for ways to reduce expenses and hold onto more money.

Here are some ways to help you save money and build your nest egg:

Reevaluate Your Subscriptions

Do you really need all of the subscriptions you currently have, especially if you’re on a tight budget? For example, streaming services like Spotify, Netflix, and HBO max can cost at least $340 per year. Consider canceling subscriptions that you don’t use or need, and only keep those that you use and can comfortably afford. Additionally, unsubscribe from email newsletters or regular advertisements that may tempt you to make impulsive purchases. You can always resubscribe later if you find that you miss or need the service.

Review Your Regular Purchases

Expenses are inevitable, especially if you have a family to support. However, it’s important to stay within budget and only buy what you need. To do this, create a meal plan for the week and make a shopping list before heading to the store. This will help you avoid impulse purchases and minimize waste. Some apps can even help you create and organize your shopping list by grouping items into categories for easy shopping. Apply this same logic to other repeat purchasing throughout your budget.

Cut Home Energy Costs

There are several ways you can lower your utility bills. For example, sealing windows and caulking doors can keep out heat and cold, reducing your cooling and heating costs. You can also switch to energy-efficient light bulbs, which use less energy and last longer, and invest in Energy Star appliances that use less energy as well. Additionally, try to utilize natural light during the day and only turn on lights at night to minimize energy use.

Reevaluate Needs Vs. Wants

It’s important to differentiate between needs and wants. Only buy what you need and can afford at the moment, and consider cheaper alternatives for other items. For example, if you’re struggling to pay your bills, it might not be the best time to buy a new car. And if your closet is already full, you don’t need to buy new, expensive clothes just to keep up with trends. If you can’t afford an item, it’s okay to wait until you have the financial means to purchase it.

Join the CashFurther Community

To learn more ways to improve your personal finances, consider joining the CashFurther community and interacting with other like-minded individuals. This can be a great way to get support and advice from others who are also looking to cut costs and save money.

Additionally, you can find additional tips and resources for managing your finances and building your nest egg. Don’t let the high cost of living hold you back – with some careful planning and budgeting, you can take control of your finances and secure your financial future.

Standard Vs. High-Yield Savings Accounts

Standard Vs High Yield Savings

Ready to Stretch Your Savings and Reach Your Goals Faster?

Read on for your complete guide to standard vs. high-yield savings accounts. 

Let your money generate even more money through a standard savings account or a high-yield savings account. Whether you want a nice nest egg, plan to remodel your home, or make a large purchase, reach your goals faster and maximize your funds. 

But how do you know which savings account is right for you?

Standard Savings Accounts

This is the type of account you typically think of when a savings account comes to mind. Every bank offers standard savings accounts, and most people normally open one in conjunction with a checking account.

Here are the pros and cons of a traditional savings account. 

Pros of Savings Accounts

  • Minimal funds required – The amount needed to open a savings account is typically very low, with some banks offering a $25 minimum initial deposit. 
  • No credit checks – Credit checks are not required to open a savings account. 
  • Easy withdrawal – You have 24/7 access to your money and can make withdrawals and transfers anytime. 
  • Minimal fees – Most savings accounts have no monthly maintenance threshold or a relatively low balance (or in some cases, number of deposits) you are required to maintain to avoid fees.
  • Insured by the FDIC – The FDIC insures up to $250,000 in deposits.

Cons of Savings Accounts

  • Low-interest rates – Interest for standard savings accounts is low. For example, as of May 2022, the national savings rate is only 0.07% annual percentage yield (APY).
  • Slower return – Due to low-interest rates, your rate of return will be slower than a high-yield savings account.
  • Limited withdrawals – You can only withdraw a maximum of 6 times per month, as mandated by the federal government. This is a key difference between checking and savings accounts.

High-Yield Savings Accounts

Just as they sound, high-yield savings accounts are designed to give you a faster return on your money.

This type of savings account is most commonly offered by online banks. You may find some traditional banks that offer a high-yield savings account as a separate product in the same way that banks issue credit cards, but they are not as common. 

Pros of High-Yield Savings Accounts

  • Higher interest rates – This type of savings account offers above-average interest rates, which means a faster return on your money. 
  • Low risk – There is no risk of losing funds as you might experience with stocks or other investments. 
  • Minimal fees – Due to lower overhead, most online banks either charge very low fees or do not have monthly fees at all.
  • Easy access – Withdraw money at any time. Just be aware of the 6-time-per-month withdrawal maximum. 

Cons of High-Yield Savings Accounts

  • Interest rates fluctuate – Interest rates can change at any time, depending on the economy. 
  • Not for long-term – Although great for the short to mid-term, there are better alternative options for long-term savings like retirement funds.
  • Withdrawal limits – Per the federal mandate, you can only make 6 withdrawals per month. 
  • Larger initial deposit – Most high-yield savings accounts require a larger minimum deposit to open an account.
  • Credit check – A soft pull of credit is typically done before opening an account. This should not affect your credit score but might be an issue if your credit score is already very low.

How to Choose Which Account is Right for You 

The bottom line is that standard and high-yield savings accounts operate very similarly. Both are insured by the FDIC, allow for a maximum of 6 withdrawals per month, have minimal fees, and are ideal for short to mid-term savings. 

The main differences are that higher-yield savings accounts have higher interest rates (which is a good thing when it comes to investments), allow for faster returns, require a larger initial deposit, and are mainly offered by online-only banking institutions.

On the other hand, standard savings accounts require a small initial deposit, are provided at both in-person and online banks, and have a lower interest rate with virtually no risk. 

Which type of savings account you choose will depend on your needs.

A high-yield savings account is the way to go if you have a large deposit available and want to reach your goals faster.

However, a standard savings account is a great option if you have a small initial deposit and are not in a hurry to reach your goals. 

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Setting and Adjusting Your Savings Goals

Setting and Adjusting Your Savings Goals

Putting together a savings account is an important part of financial independence. Savings make it possible to withstand financial setbacks and to occasionally take risks for greater rewards. You already know that savings aren’t built in a day. It takes time to accumulate a fair amount of savings by setting aside some of your income each month. One of the best ways to help yourself save is to set savings goals. 

Not sure where to start? No worries, we’ve got a few useful tips to help you set and adjust your savings goals.

Defining Your Savings Goals

The first step is to set an initial savings goal. This can be how much you want to have in reserve or saving up for something specific. Your first savings goal typically comes from personal motivation, whether that’s a desire for financial security or an effort to buy something special. 

Here are a few ways you can define your savings goals:

  • How much you want in your emergency savings
  • How much you want to set aside each month for a vacation
  • The cost of something big you want to buy or gift
  • To keep your savings above a certain dollar amount
  • To save a certain percentage of your income

Remember that savings accounts typically work better the longer the money stays in the account, so long-term savings goals will typically be more beneficial.

Setting Savings Goals

How do you define your savings goal? This is often represented by the amount that you want to save each month, week, or paycheck. The two most practical approaches to savings involve taking a small amount out of each month’s income.

Percent Saving means that you take a certain percentage of your income each time you are paid. You can even make direct deposits if pre-arranged with your bank. Percentage savings can adjust to raises and better jobs easily and may fit easily into your household budget calculations.

You can also set aside a specific amount per month or paycheck. Let’s say you deposit just $50 a month into your savings. Over six months, that becomes $300, or $600 with every year you save at this rate. You don’t have to start big because you can adjust your savings goals as your income increases.

Different Types of Savings Goals

Committing to a savings goal can be short-term or long-term. A short-term savings goal may be easier to get started because you can see the celebration at the end. Short-term savings goals tend to have a specific target, like booking a weekend getaway, a new appliance, or a new personal car.

Long-term goals tend to relate more to your lifestyle. You might save a long time for a home down payment or make a habit of saving so that your safety net money continues to grow year after year.

When to Revisit Your Goals and Make Changes

When should you adjust your savings goals? When your financial circumstances change, so too will your desire and need to save. If you reach a goal you were saving for, you might choose a new short-term goal or transition to long-term savings.

If the amount you save monthly has become pocket change because your prospects have improved, congratulations! Time to update your savings to build a deeper nest egg. Being able to put a little more aside is always a good thing.  The same is also true if the recent increase in cost-of-living has cut into your funds. Modestly drop your savings goals or reduce the percentage that you save when money is tight.

If you find you have excess spending money at the end of the month, drop it into your savings and consider increasing the amount you save monthly. Unless you have a strong urge to splurge, you’ll enjoy saving yourself from a dip into a larger savings account later on instead.

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Savings 101: Where, When, and How To Grow Your Savings Account

Savings 101: Where, When, and How To Grow Your Accounts

More than 55 million Americans have nothing in their savings account, while 40% of Americans struggle to pay for basic needs – making budgeting and saving more vital than ever.

Building your savings helps you stop depending on credit cards or going into debt while working to achieve your financial goals. Saving may seem impossible, but the hardest part about saving money is getting started. With a simple and realistic plan, you can start saving for your short-term and long-term goals.

Keep reading to learn how to embrace saving and work to secure your financial freedom.

How to Open a Savings Account

The best place to put your savings is one that complements your financial goals and comfort levels. Money in a savings account earns interest, which is excellent because then your money is working for you. Before opening a savings account, take your time and research the terms and interests different credit unions and banks offer. If opening more than one savings account will help you organize your finances better, go for it.

Where Should You Save Your Money?

Before you open your savings account, you need to answer the following questions?

• What are your saving goals?

• When will you need the money?

• Interest rates

If you’re saving to build your emergency fund, keep your money in an easy-to-access account that attracts no penalties on withdrawal. If saving for long-term goals, go for accounts with high-interest rates. You can also opt to have multiple saving accounts to meet different goals.

If you feel you will be tempted to transfer your savings into your checking account, consider opening a savings account with another bank. You’re less likely to touch savings if the funds are harder to access. Be cautious about keeping your savings in cash in case of theft or disaster.

Choose How to Apply

You can apply for a savings account by visiting your preferred banking institution in person, by phone, by mailing the application, or online.

Gather Required Documents

To open any bank account, you need to present some documents and personal information. If you’re opening an individual or joint savings account, make sure that you and the other parties have the following documents:

• Social Security number

• Identification (typically a driver’s license or passport)

• Contact information

• Date of birth

• Address (sometimes including proof of residence, like a utility bill)

• Bank account information for your other accounts, if applicable

Choose an Individual or Joint Account

If you want to create personal savings, open an individual account. If you’re opening an account with a third party, like your child or spouse, open a joint account so that they are also able to access the funds.

Submit Your Application

Submit your application to the financial institution of your choice in person or online, and await account activation which can take a day or two.

Fund Your Savings Account

To activate your account, you need to deposit a minimum opening balance – usually between $25 to $100 depending on the type of account. You can typically fund the account by cash or check. Be prepared to fund the account at the time that you are approved.

Set up Online Banking

Nearly all banks and credit unions offer online banking platforms. Sign up for online banking and download and download the bank’s mobile app to manage your account easily.

Making the Most of Your Savings Account

Set Your Specific Savings Goals

Before you start saving your money, set clear and specific goals for your savings. Do you have an emergency account with a few months of savings, or want to buy a new house in a certain neighborhood? Working with set goals derives more satisfaction and strengthens your savings mindset while allowing you to create a realistic savings plan.

Budget for Savings

Once you have a clear savings goal, figure out what it will take to get there and assess if that amount of time and money is realistic based on your personal circumstances. If not, make more adjustments to your plan. Then sit down, note unnecessary expenses you can let go of, and channel the cash into your savings.

Set up an Automatic Deposit

Set up a fixed automatic fund transfer (usually a percentage of your check or a flat dollar amount) from your paycheck through your employer, or your checking account with your bank to your savings account. You are less likely to spend the funds that you intend to save if the money never touches your spending account in the first place. Just make sure you are able to quickly access your savings in case of an emergency.

Track Your Savings Account

Keep track of your progress and account, and consider setting small, incremental goals. Watching your set goals become a reality as your savings continue to grow is exciting, which makes you less likely to spend frivolously. Though temptations may set in, stay committed! Getting started is always the most challenging part. Every step in the right direction is a massive milestone toward achieving your financial freedom.


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How to Start Investing: Terminology And Best Practices For Beginners

How to start investing, young man investing

Many people want to learn how to start investing their money. Investing is possible even on a modest budget. Start with low-risk investments and work your way up to more complex investments over time. Once you have mastered risk management techniques, you can consider adding other asset classes, such as commodities or real estate, to your portfolio.

There are many forms of investing, but we’ll focus on low-risk investing for this guide. Low-risk investing is a great way to grow your finances over the long term. The most common investment vehicles are stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Each has its own risks as well as rewards. Keep reading below for some tips that will help you get started.

How Much Money Do You Need to Start Investing?

There’s no magic number regarding how much money you need to invest. But a good rule is to start with 10% of your income. That way, you can still cover your essentials and have some wiggle room in your budget. If you’re unsure where to begin, try starting with a low-risk investment like a savings account or a certificate of deposit (CD). As you get more comfortable, you can start venturing into higher-risk investments.

Remember that the amount of time invested will be the most important factor in how much you’ll earn. You’ll likely need to keep your money there for at least five years to make big bucks on investment. It takes time to see the rewards because most stocks take a while to fully appreciate. To beat inflation, which is generally about 3%, you want your return on investment (ROI) to be at least 6%. The best way to do this is by playing it safe with your initial strategy.

Once you have your investment plan in place, you need to determine how much of your money to put into it. Before deciding on a dollar amount, figure out what amount of risk you can tolerate and when you’d like to see a return on your investment. If you’re just getting started with investing, try starting small with just 1-2% of your income. It will help you understand how much money is needed while allowing room for growth.

Short-Term vs. Long-Term Investing

Are you looking to make quick cash or grow your money over time? Your investment timeline will play a significant role in deciding which type of account is right for you. Short-term investing means getting the most return on your investments within the next year, while long-term investing typically means saving and growing your assets until retirement. If you want to invest in stocks or funds (see below), it’s usually best to do so through an IRA or employer-sponsored 401(k) account; this way, if you change jobs and don’t have access to these accounts anymore, the government won’t penalize you with penalties and taxes.

You can also open up a brokerage account (no tax benefits but no restrictions either) or choose to keep your investments in ultra-low-risk places like high-yield savings accounts and certificates of deposit. You’ll need to consider how much risk you’re willing to take on as well—higher risk yields higher potential returns, but also comes with serious potential losses.

Make sure you know what kinds of stocks or funds you want to invest in before opening any new accounts. Mutual funds are professionally managed by people who study different types of investments, which can lower the risk for investors just starting. ETFs are similar to mutual funds but trade more quickly on exchanges, making them easier to buy and sell than mutual fund shares.

When choosing where and how to invest your money, no one-size-fits-all solutions exist! Your risk tolerance level should be considered alongside your financial goals and timeline.

Investing vs. Savings Accounts

The main difference between investing and saving is that when you invest, you’re using your money to earn more money. With a savings account, you’re just keeping your money in a safe place where it will usually earn a bit of interest. You can still make pretty good returns with suitable investments, but those investments are inherently much riskier than a savings account.

In long-term investing, you generally can’t withdraw funds from your investment accounts without significant penalties, so you should consider building an emergency fund to make sure you have cash available if you need it. An emergency fund should have enough funds to cover at least 3-6 months of expenses.

Next Steps for New Investors

Investing is a great way to grow wealth and save for your long-term future. However, it can be daunting to get started if you don’t know the basics. This guide will give you the foundation you need to start investing today.

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