When you start making an effort to be more responsible with your money, you will soon see the benefits. If you have a strict budget, you can afford to put more aside each month and your savings account will begin to grow. When you start to build up more savings, it’s important that you protect that money. If you don’t, you may end up undoing all of your hard work in the future. But a lot of people don’t realize this and they just let their savings sit in the same account, which can be a big risk. If you are starting to build up some savings, these are the best ways to protect that money.
Stick To Your Budget
This sounds obvious, but a lot of people start to be a bit more relaxed with their budget as the savings account grows. They don’t think that they need to worry so much about it because they have a healthy amount in their savings and it doesn’t matter if they go over budget and contribute a bit less this month. The problem is, it soon becomes a habit and you are going over budget more and more each month. Eventually, you may end up taking money out of your savings account instead of contributing to it, and you will slowly chip away at it until it’s all gone. That’s why it’s so important that you continue your good spending habits and stick to your budget. If you are in a much better financial position, you could consider writing a new budget that allows for a few more luxuries, but make sure that you are still making good contributions to your savings account each month.
Build An Emergency Fund
Unexpected bills can really put your savings at risk because if you don’t have the money to cover those expenses, you will have to dip into your savings. If it’s something big like car or home repairs, you can wipe out a big chunk of your savings in one go. The best way to avoid that is to build a separate emergency fund. Each month, when you are contributing to your savings, you should also put some money into a separate emergency fund. That way, you can use that money and leave your savings alone if you are hit with any unexpected bills. This is one of the most important things if you want a long term savings plan.
Write A Will
If you have a lot of money in a savings account, you need to start thinking about where it will go if something happens to you. If you don’t have a will in place, your money may not necessarily go to the people that you want it to after you are gone, so it’s important that you make the arrangements now. Get in touch with a probate attorney and see what your options are in terms of a will or a trust, so you can protect your money and have more control over what happens to it after you are gone. A lot of people neglect writing a will because they don’t think that they need to worry about it until they are older. In most cases, that is true, but you never know when something bad could happen to you, so it’s best to be prepared for any eventuality.
Set Up Some Investments
If you just let your savings sit there in an account, they are not really working very hard for you. There is also the chance that you could actually be losing money in real terms because of inflation. If the rate of inflation is higher than the rate of interest you are getting, the purchasing power of your savings is actually going down and your money is worth less in real terms. That’s why it’s a good idea to set up some investments instead of letting the money sit there doing nothing. If you put money into stocks and shares, you can earn money on your savings. You could also consider real estate investments if you have a larger amount of money in your savings. Just make sure that you spread your money out and you don’t put all of it into a single investment because you need to protect yourself against investments that go bad.
Move Your Savings Around
You can also protect your money from inflation and maximize your savings by moving them around on a regular basis. It’s important that you shop around for the best interest rate when you first open your savings account, but the deals are always changing and there may be a much better interest available right now. That’s why you should always keep an eye on the different savings accounts that are available and if you can, open a new one with a higher interest rate. Moving your money around regularly is the best way to offset the impact of inflation and increase your savings. If you can put it in an account that is not as easy to access, you will find it easier to avoid spending any of it.
Stop Using Credit Cards
If you are using credit cards on a regular basis, you are cancelling out any interest that you make on your savings. The interest payments on your credit cards will be a lot higher than the interest that you earn on your savings, which means that you are probably losing money. That’s why it’s a good idea to put the extra money into paying off your debts instead of putting it into savings to start with. Once your debts are cleared, you can start saving more money each month without wasting anything on credit card interest.
When you have paid off your debts, you need to avoid using credit cards again in the future if possible. Having a strict budget is an important part of that, and you should stop carrying them around with you so you are not tempted.
Building a healthy savings account is the first step, but now that you have the money there, it’s important that you take these steps to protect it.