Long-Term Budget Tips vs. Short-Term Savings Tips
By: iTHINK Financial | Jul 07, 2021
Getting a grasp on your finances is one of the most challenging things to do in life. We live in a world that is actively trying to get us to spend money, oftentimes on things we do not need.
We know that budgeting and saving are the most intelligent moves for our financial futures, but how can a person get started? There are many ways to budget for the short and long term.
We will explore some budget strategies in this article, discussing long-term budget ideas and short-term savings strategies. Hopefully, you can use some of the information below to put yourself on the right track.
Let us look at some smart budget tips.
Budget Tips to Save for Now and Later
It is important to note that short- and long-term savings plans are quite different. Short-term strategies have a lot to do with personal habits, self-discipline, and identifying excess.
Long-term strategies deal more with investments, professional help, and plotting for retirement. There is some overlap but saving up for a vacation is a lot different from having a condo in your golden years.
Let us start with some short-term ideas that work.
1. Identify Excess Spending
There's no getting around the fact that saving requires cutting out some of the splurges.
Allow yourself the luxury of buying something you enjoy here and there but make a note of areas where you are spending extra money often. Common areas are snack foods, streaming services, and online purchases.
There are a lot of other areas where you could be spending too much as well. The fundamental question is whether you need the thing you are buying. Beyond that, ask yourself if you are really enjoying it or just using it out of habit.
For example, getting a candy bar and a soda at lunchtime might seem like a harmless expense. Over the course of a whole year, though, you might be spending over $1,000 on that guilty pleasure.
Unless that lunch snack is the best part of your daily routine, that $1,000 might not be worth it. Go through your bank statement and pinpoint areas where you spend more than you should. You might be surprised at what you find.
2. Set Clear Goals
A big mistake that many people make is setting vague or unachievable goals. For example, something like "I want to do better with saving" is not a clear goal.
On the other hand, "I want to save $4,000 this year" is a clear goal. You might also say something like, "I want to stop eating out" or "I want to save 15% of my income."
When you have a succinct and clear goal, you can work your way back from it and figure out how much you need to save to achieve it. If you want to save $4,000 in 12 months, you will need to save around $333 every month.
Look at your income, bills, and everyday expenses to see if you can achieve that goal. Then, you can set that figure aside in your budget and know what you need to do.
When we do not have clear ideas of what we want to do, it is easy to make excuses or forget about the goal altogether. We have all set a goal or two that just faded into the back of our memories.
3. Have Purpose for Short-Term Goals
Many people struggle to stick to a savings plan if they don’t have set goals in place.
Short-term goals are ideal for beginners because they are easier to achieve. So rather than thinking years ahead, plan bite-size goals that can be accomplished within a week or a month’s time. The longer you stick to this, the bigger your savings will be.
Whether you’re saving up to support your latest hobby or planning a vacation for the future, make sure your goal is clear to yourself. It helps to keep track of progress by writing it down and seeing your savings build week to week.
By reminding yourself why you are making a financial change, you will have an easier time fighting off the urge to spend carelessly.
4. Take a Course
If you struggle with your spending habits, there is always the option of investing in a financial course. These are programs that work you through some of the essential pieces of saving money.
You will gain some excellent tricks and tips, and you might even get connected with some fantastic savings or budgeting applications or programs.
Courses help you to work through anything from the financial ABCs to advanced topics. For example, you will get an answer to the age-old question "what is a debit card?" You can also get expert insight on how to build credit, the risks of credit cards, and a whole lot more.
You can take a look at some courses to see what fits your needs.
5. Talk with a Financial Planner
A financial planner is someone who can look at your financial situation and give you personal guidance on how to move forward.
It is an investment that will pay for itself time and time again. With that said, financial planners tend to be geared toward long-term investments and retirement funds.
There is no shame in having a professional look at your immediate situation and give you some advice.
Planning for the Long Term
Planning out your strategy for long-term savings is different.
There is a lot more strategy and insight needed to make intelligent decisions with the money you are going to use for retirement. Additionally, there are some different methods of decision-making on the front end that you need to consider.
For example, seeking out employers that match your 401k is something that will help you inch toward retirement. Let us look at some other methods you should incorporate for long-term savings.
1. Start as Early as Possible
One of the most important things to keep in mind as you start to save for the long term is that the sooner you start, the better you will do.
It is simple, and we all understand that fact, but some tend to use time as an excuse to avoid saving. You may think, "I have more than enough time to start saving later."
However, the truth is that unless you know how much you need to save to be comfortable in retirement, you might not have any additional time. If you want to be sure that you are setting yourself up with an adequate retirement fund, you should start saving soon and let the power of compound interest do the work.
Additionally, the sooner you start, the less you must contribute to your account. We will explain that next.
2. You Can Start Very Small
If you are young, you might not have a whole lot of money to start contributing to a retirement account. That can make it complicated to even think about investing your money in the first place.
The thing is, tiny contributions grow to massive investments over time. Hypothetically, an investment of a few dollars could wind up putting your great-grandchildren through college.
That is a long time, though, and we are currently thinking about how to set ourselves up for retirement. So, keep in mind that starting early and putting 10 or 20 dollars each week toward your retirement will set you up nicely.
Those investments might feel small, but the earlier they are invested, the larger they will become. The point is, there is no excuse to push off savings until a later day.
3. Invest in a Home
Buying a home is one of the best things that an individual can do to increase their wealth.
If you have never thought about this or do not understand how homeownership works, you might be thinking that purchasing a home sounds like a total money-suck.
You need to take out a loan to invest in a home, and there are many expenses involved with managing one. With that said, a home appreciates as you own it. It does that without you having to do anything about it in most cases.
The market grows at roughly 4% every year on average. Some years might be better than others but looking at the market's long-term growth shows that things appreciate over time.
If you are contributing to the home in meaningful ways, that value will increase even more. Many people purchase their first home, sell it, use the money for a larger second home, and so on.
This process allows you to keep increasing your wealth and investing your home's value into new homes to make you more money. You are making money off your living situation and setting yourself up for retirement.
The beautiful thing is that there is hardly anything you must do. You need to have a place to live, and renting is just a complete loss. So, even if you are young, look into the option of purchasing your first house.
4. Get Professional Help
Professional financial advice is beneficial.
When you are dealing with something as important as your finances, long-term or short-term, it never hurts to talk with someone who works with these kinds of numbers every day. They will put you in touch with resources, explore options that could increase your savings, and a whole lot more.
The pros can help you understand all the different terminology and meaning wrapped up in financial planning. The world often expects us to know numerous complicated financial terms without ever learning them.
We are here to help you figure it out.
Additionally, there are a lot of different ways to get financial help from professionals. Applications and digital programs allow us to shift a lot of the work online, giving you the luxury of accessing finance tools from the comfort of your own home.
Need More Financial Insight?
Hopefully, our budget tips were helpful to you as you start to figure out how to manage your finances. There is a lot more to learn, though, and we are here to help.
Explore our site or join us for more insight on budgeting, investing, how to create a budget, and more.