When times are tough, it’s hard to imagine better days, but without a long-term savings strategy, those better days might never arrive.
Alexandria Blaelock, author of Holistic Personal Finance: How to pay for the life you want says “The long-term, is a bunch of short-terms strung together. In just the same way, a long-term savings strategy is a bunch of short-term strategies in a row.”
Here are Blaelock’s tips for developing a long-term savings strategy:
- Know what a strategy is: Strategy is a fancy way of saying you have a series of steps to achieving your goal, whether that’s checking the mailbox or buying a house.
- Know the difference between long and short term: When it comes to planning, long-term is generally five to ten years, and short-term 12 months or less. You can see that the long-term is made up of a collection of short-terms.
- Think big, then work backwards: Say you did want to buy a house; you check the prices and you find it will cost you half a million dollars. You discover you can borrow $400k, but need to find $100k upfront. How are you going to get that money together as quickly as possible?
- Start small, then work forwards: Right now you might only be able to save $10 a month, so start there and think about how you can find more money to save more often.
- Think about how you can make your savings grow: When you reach the limits of how much you can save, it’s time to think about how you can grow it. Start with a jar for loose change, and when you reach the right threshold open an interest-bearing account. Keep saving, and when you reach the next threshold, upgrade to a high-interest account. Then a managed fund, or maybe some company stocks.
Alexandria’s tips on developing a long-term savings strategy will help you save more and earm more on your savings, and reach your goals sooner.
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