Saving Strategies
This rule suggests dividing your income so that 60% goes to needs, 30% to wants, and 10% to savings or debt repayment.
What is 60/30/10 rule?
The “S” in SMART stands for this word, meaning your goal should be clearly defined.
What is Specific?
This is the money you receive from working at a job, often paid weekly, biweekly, or monthly.
What is earned income (or wages/salary)?
Groceries, rent, and utility bills are examples of these, which are essential for daily living.
What are needs?
The financial cushion set aside for unexpected expenses, such as car repairs or medical bills.
What is an emergency fund?
If you can track your progress toward a goal, it meets this SMART criteria, represented by the letter “M.”
What is Measurable?
This type of income is earned without active work, such as from investments, rental properties, or dividends.
What is passive income?
Buying a new video game or going out for ice cream are examples of these non-essential purchases.
What are wants?
This type of savings account locks your money for a set period and typically offers a higher interest rate than regular savings accounts.
What is a certificate of deposit?
Setting a goal you can actually accomplish, not something impossible, addresses this letter in the SMART acronym.
What is Achievable (or Attainable)?
The amount of money you take home after taxes and deductions is called this.
What is net income (or take-home pay)?
This type of expense is something you must pay for to survive, like housing, food, or basic healthcare.
What is a need?
Name one automatic method you can use to make saving money easier and more consistent every month.
Direct Deposit
SMART goals require your objectives to be relevant. Relevant means in setting financial goals...
What is making sure the goal matters to you and aligns with your values or needs?
Name one common payroll deduction that reduces your gross income before you receive your paycheck.
What is federal income tax (or Social Security, Medicare, health insurance, etc.)?
You want a car with leather seats, but you need reliable transportation to get to work. Which part is the want, and which is the need?
The want is leather seats; the need is reliable transportation.
If you want your savings to grow faster, besides earning interest, name one additional strategy you can use to maximize your savings over time.
What is high-yield savings?
Rewrite this vague goal as a SMART goal: “I want to save more money.”
What is: “I will save $500 in the next 6 months by putting aside $21 from each paycheck into my savings account”?
If you are self-employed or work as a freelancer, you may receive this type of tax form at the end of the year instead of a W-2.
What is a 1099 form?
Explain how you could use the needs vs. wants concept to create a budget that helps you save money each month.
What is: By identifying and prioritizing needs over wants, you can allocate your money first to essentials, cut back on non-essential spending, and set aside more for savings each month?