Let's Kick Off 2024 Right: Avoid These Savings Pitfalls.

It is a new year and a prime opportunity to reassess your saving habits and rectify any common mistakes that may be hindering your financial growth.

If you want to start the new year with a fresh and positive outlook on your finances, you need to avoid these 7 common savings mistakes that can cost you dearly in the long run.

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1. Not Having a clear savings goal

Saving is easier when you have a clear and specific purpose for it. Whether it’s buying a house, starting a business, or traveling the world, have a concrete goal.

Saving without a purpose, on the other hand, can make you feel bored, frustrated, or tempted to spend your money on something else.

To save with a purpose, you need to:

• Identify your short-term and long-term goals.
• Break down your goals into smaller and more manageable steps and assign an amount and deadline to each one.
• Create separate savings accounts for each goal
• Track your savings and celebrate your milestones.

1. Not having a budget

A budget is the foundation of any successful savings plan. It helps you track your income and expenses, identify your needs and wants, and allocate your money wisely. Without a budget, you’re likely to overspend, under-save, and miss out on opportunities to grow your wealth.

To create a realistic and effective budget, you need to:

• Review your bank statements and receipts to see where your money is going.
• Categorize your expenses into fixed (such as rent, utilities, and debt payments) and variable (such as groceries, entertainment, and clothing)
• Allocate a percentage of your income to each category, making sure to prioritize your savings and essential expenses.
• Monitor your spending and adjust your budget as needed.

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1. Not having an emergency fund

An emergency fund is a stash of cash that you can access in case of unexpected events, such as job loss, medical bills, car repairs, or home maintenance. Having an emergency fund can help you avoid going into debt, or missing out on important payments.

To build a solid emergency fund, you need to:

• Determine how much you need to save.
• Aim for at least 3 to 6 months’ worth of living expenses, or more.
• Automate your savings.
• Resist the temptation to use your emergency fund for non-emergencies, such as impulse purchases, vacations, or gifts.

1. Not saving for retirement

Retirement may seem far away, but it’s never too early to start saving for it.

To catch up on your retirement savings, you need to:

• Estimate how much you need to save, based on your desired retirement age, lifestyle, and income sources.
• Increase your contributions whenever you get a raise or bonus.
• Diversify your portfolio and invest in a mix of stocks, bonds, and other assets.
• Don’t withdraw or borrow from your retirement accounts.

5.Saving too little or too much

Saving is a balancing act. You need to save enough to meet your current and future needs, but not so much that you deprive yourself of enjoying your life.

To find the right balance, you need to:

• Follow the 50/30/20 rule – 50% to needs, 30% to wants, and 20% to savings
• Adjust the rule according to your personal situation, goals, and preferences.
• Review your budget and savings regularly, and make changes as needed.

1. Saving without investing

Saving is not the same as investing. Investing money involves putting your money in a risky and illiquid place, such as stocks, bonds, or real estate with the aim of growing your money.

To save and invest wisely, you need to:

• Understand the difference between saving and investing, and the trade-off between risk and return.
• Determine your risk tolerance, time horizon, and investment objectives.
• Allocate your money between saving and investing, based on your goals and preferences.
• Diversify your portfolio and invest in a variety of assets, sectors, and markets.
• Rebalance your portfolio and adjust your strategy as needed.

1. Procrastinating on Saving

Waiting for the “right time” to start saving can be a costly mistake. The power of compounding works best when given time, so start saving as early as possible. Whether you can only set aside a small amount, consistency is key. Even small, regular contributions can grow significantly over time.

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If you do not have a savings account yet, visit the nearest Keystone Bank branch to open one and start saving!