1. Record your expenses
2. Make a budget
3. Plan on saving money
4. Set savings goalsSetting savings goals makes it much easier to get started. Begin by deciding how long it will take to reach each goal. Some short-term goals (which can usually take 1-3 years) include:
Starting an emergency fund to cover 6 months to a year of living expenses (in case of job loss or other emergencies)
Saving money for a vacation
Saving to buy a new car
Saving to pay taxes (if they are not already deducted by your employer)
Try the Bank of America savings goal calculator to see how long it will take for you to reach your saving goal.
Long-term savings goals are often several years or even decades away and can include:
Saving for retirement
Putting money away for your child's college education
Saving for a down payment on a house or to remodel your current home
5. Decide on your prioritiesDifferent people have different priorities when it comes to saving money, so it makes sense to decide which savings goals are most important to you. Part of this process is deciding how long you can wait to save up for a goal and how much you want to put away each month to help you reach it. As you do this for all your goals, order them by priority and set money aside accordingly in your monthly budget. Remember that setting priorities means making choices. If you want to focus on saving for retirement, some other goals might have to take a back seat while you make sure you're hitting your top targets.
6. Different savings and investment strategies for different goalsIf you're saving for short-term goals, consider using these FDIC-insured deposits accounts:
A regular savings account, which is easily accessible
A high-yield savings account, which often has a higher interest rate than a standard savings account
A bank money market savings account, which has a variable interest rate that could increase as your savings grow
A CD (certificate of deposit), which locks in your money at a specific interest rate for a specific period of time
For long-term goals consider:
FDIC-insured IRAs, which are built for purposes such as retirement savings. If you’re not sure how much money you should set aside for retirement, give the Merrill Edge retirement calculator a try.
Securities, like stocks and mutual funds. These investment products are available through investment accounts with a broker-dealer (e.g. Merrill Edge). Remember that securities, such as stocks and mutual funds, are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank, and are subject to investment risks including the possible loss of principal invested.