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When you’re looking at setting goals for your future, consider whether they are short-term or long-term. One of the most important things you can do is to write down your goals and prioritize them. Look at where you want to be in one month, in six months, in a year, and in three years. Set realistic goals—a budget is meant to help you shape the way you spend and save so you’ll have more in the long run. Don’t look for a quick fix; start by looking at how you can manage and grow your money.
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Once you have identified items in your budget that you can funnel into your savings, plan how you can make them fund your goals. Don’t wait to see how much you have left at the end of the month to put into savings—pay yourself first. Most financial advisors will tell you that putting back 5% of your gross salary is a good place to start. If you have trouble separating your savings from your general monies, set up a Systematic Investment Plan (SIP). With a SIP, you can put as little as $25 out of each paycheck to be placed into the investment of your choice. It’s not only a great way to discipline yourself; it eliminates the worry of investment timing. Because your purchases are spread out over many market cycles, you don’t have to fear buying at a bad time. When considering a systematic investment plan, you should look at your ability to make regular investments through periods of fluctuating prices. A regular investment program neither provides assurance of making a profit nor guarantees against a loss in a declining market.
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Short-term Goals
No matter what you’re saving for, you need to define and refine your approach. If you’re looking to save for a dream vacation, a down payment on a house, or even your wedding, you need to look at the best ways to save. Start by assessing how much money you have now, how much you’ll need and how long you have to reach your goal(s). If you’ll need quick access to that money, you may want to consider more liquid investments like money markets.
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Long-term Goals
Some events are so far in the future that we think we have time to wait to start saving, but that type of thinking can be misleading. Putting off saving for retirement can seriously impact the amount you’ll have later. Don’t underestimate the value of compounding funds. Take advantage of any employer sponsored pension plans and 401(k) plans, especially if they match your contribution. Consider starting an Individual Retirement Account, which gives you a tax break yearly and a source of income during your retirement.
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