8 Tips to Kickstart Your Savings & Investment Strategy

4/12/2023 - By Sarah Horne

Saving money is a critical component of a successful financial plan. If you don’t know how to begin managing your money, setting up a savings plan is a great way to start. Here are eight tips to kickstart your saving strategy!

Create a budget. Before setting up your savings plan, use your budget to understand your spending. Determine how much you can save and find opportunities to cut back on spending. See Pierce Broscious' recent article on budgeting for more.
Determine your savings goal. Then determine approximately how long it will take to achieve these goals by defining them as short-term or long-term objectives. Short-term goals are goals that can be reasonably achieved in 3 years or less. You should treat short-term savings goals differently from long-term savings goals. An emergency fund is the first short-term savings goal we recommend. We recommend building up three to six months’ worth of living expenses to cover you in the event of an untimely job loss. Other short-term saving goals may include a down payment on a car or house or a home renovation in the next five years. These savings should be easy to access and held in a deposit account with a bank or credit union. However, it’s important to know how inflation could affect your cash savings. With high inflation and little interest available through bank accounts, you risk losing purchasing power when you hold more cash than is necessary to meet short-term or emergency needs. Setting money aside for your long-term goals is a little more challenging as there are many future uncertainties to contend with. long-term goals, we recommend building an investment strategy with a diversified portfolio of stocks and bonds to give your money the best chance to meet your financial goals.
Invest in your retirement. The most common long-term savings goal is retirement. We recommend using tax-advantaged accounts like 401(k)s and/or IRAs. Take advantage of company matching contributions offered through your workplace retirement plan by contributing enough to receive the maximum match. Many people also don't realize that saving for retirement is more than a one step process; you must both save the money and invest it in the appropriate investment vehicle for growth. Invest your account based on when you’ll be leaving the workforce, with a higher stock allocation when you’re younger and slowly decreasing that allocation as you approach retirement.
Trim the fat. Review your account statements to find patterns in your spending. This creates opportunities to put more monthly cash toward your savings goal. For example, you might find that you get coffee three times per week or get a manicure twice per month. Could you cut back your coffee to once per week and stretch your manicures to every three weeks? If so, put those savings into your account-- you earned it!
Pay yourself first. When thinking about your finances, treat savings like it’s an important bill. Prioritize your savings goals over any discretionary spending. Every payday, move a pre-set amount of cash to your savings account. Most employers also allow you to divert your paycheck to multiple bank accounts making it easier to save first.
Make it automatic. I just discussed one way to automate your savings goals. Another way is to set your retirement savings contribution to increase by 1% each year on a set date. While it’s critical to have cash on hand in the event of an emergency, one drawback of holding too much cash is that it does not grow like invested assets. Increasing your retirement contributions has shown to significantly boost overall retirement savings while creating very little financial hardship typically associated with a decrease in take-home pay.
Don't touch your emergency or retirement savings unless you have to. Avoid withdrawals from your emergency and retirement savings unless you’re in a financial emergency. These funds can help you feel secure but using them for discretionary spending can become a bad habit. If you have to dip into your savings, be sure to make a plan to replenish it as soon as you can. On the other hand, if you’ve reached your savings goal for a specific purchase, you should feel free to spend it as you’ve planned.
Check in often and keep track of your progress. Use visuals to see how much progress you've made toward your goal. Celebrate milestones by congratulating yourself! Saving money is an important skill for financial security and living within your means will serve you well throughout your life. Your future self will thank you for it!

Questions?

Got questions about saving or investing? Request to speak with a Saltmarsh financial advisor here.

Want to dive deeper? Watch our Foundations of Financial Stability webinar for a high-level overview of initial financial objectives.

About the Author | Sarah Horne

Sarah is an associate for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. She is responsible for the research and preparation of investment proposals. Sarah also assists with the creation and maintenance of client files and communications. Before joining Saltmarsh, Sarah was a representative at a financial planning firm where she provided educational and holistic guidance on financial topics including budgeting, retirement planning and financial risk management.