Start small. Think big.

What is the difference between a dream and a goal? 

A dream is a vague idea with undefined steps. “I want to travel to Italy.” This is a dream with no action steps to make the dream a reality. A goal is specific plan with defined steps. “I want to run a 5k on July 4^th and I will run one mile, three days a week until the day of the race.” This goal names the ‘what’ and the ‘how’. It defines the desired result and the steps to achieve the goal. Virginia Saves encourages people to create a financial goal and make a plan to achieve it.

When enrolling at Virginia Saves, new savers make a savings commitment. The form asks for a goal, amount saved per month, number of months and total saved amount. A good savings goal has 3 parts: the amount to be saved, the period of time and the purpose of the savings.

Here are two examples:

1. I will save $30 for 12 months for Emergency savings.

            $30 x 12 months = $360

That would be a nice emergency savings. The emergency savings is money set aside for unforeseen problems that arise.

2. I will save $25 for 10 months for Christmas.

            $25 x 10 months (February through November) = $250

Christmas would look pretty Merry with $250 set aside for gift giving. A family with children in the home will enjoy the money saved in December for holiday gifts.  In January, the Ghost of Christmas Past will not visit when the credit card bill is opened.

Both of these examples will help a family’s financial situation.

Success is will be more likely if the goal is realistic.

• The amount should be 10% or less of income. Attempting to squeeze the budget too tight to save quickly can hurt long term motivation.
• Start Small. The first savings goal should be relatively small. A new saver should try a small savings goal which can be achieved quickly. A successful experience will add confidence.
• Total amount saved should cover the expense of the goal. Saving $100 for a plane ticket will not help if the ticket will cost $150.

Here is an example of a goal that needs some adjustment:

I will save $3 a month for 12 months for a reliable used car.

            $3 x 12 months = $36

That is not going to buy much of a car! If the goal is a $2000 car, then the monthly amount saved will need to be increased and the length of time to save will also need to be extended.

A great saving strategy is to ‘Pay Yourself First’. Save money out of each paycheck before paying bills. Another great strategy is to make savings automatic. Set up a direct deposit or transfer savings from a checking account in a savings account.

The amount saved is not as important as starting the habit of saving.  Increase the amount saved each month when possible. Send a portion of a tax refund to savings with the split refund.

Start an Emergency Fund! Money set aside for the unexpected is the first step to a successful financial future.

What is your savings goal? Let Virginia Saves motivate you to discover for yourself the peace of mind that accompanies having money in the bank.

Share your savings goal at virginiasaves@gmail.com!

Tax Refund Split to the rescue!

Did it happen again?  Did you say you were going to put some of your tax refund into savings last year, only to realize you spent the whole thing before you had a chance to move the money? If this describes you, then let the option to split the tax refund come to your rescue!

Savings will improve financial security. Life is unpredictable and brings about unexpected events that cause stress. The stress level of an unexpected event such as a major car repair is difficult to handle. The financial burden of the bill from the repair shop is just part of the problem. The need for new transportation arrangements until the vehicle is repaired is not only inconvenient, but can be very expensive. Money in savings helps buffer the impact on the financial situation.

Virginia Saves encourages people to become savers. The tax refund can jumpstart savings and prepare for life’s bumps in the road. Virginia Saves’ partners offer free or low cost, low balance accounts especially designed for our savers. Most people can become savers regardless of income. Start saving a portion of income received every month. Make savings automatic! Automatic transfers are great saving options at most local banking institutions. Start small. Transfer $5 to $25 to a savings account monthly. Think Big. The amount that is saved is not as important as just starting the habit of saving.

According to the IRS, the average refund for electronically filed tax returns in 2009 was approximately $2900. The IRS allows the tax refund to be split among two or three accounts. For example a $1500 tax refund can deposit $500 into a checking account to pay past bills or purchase current needs and deposit $1000 into a savings account for emergency savings. Tax preparers use Form 8888, Direct Deposit of Refund to More Than One Account, to allocate the tax refund to accounts as requested. This form tells the IRS how much money to electronically deposit in each account. It is important to check the box on the 1040 that indicates the splitting of the tax refund and double check the account and routing numbers before the form is submitted. See Frequently Asked Questions about splitting tax refunds.

Do something different this year; save part of your tax refund. You will be glad you did!

Other article about this subject:

Splitting Federal Income Tax Refunds

Where’s My Refund? 

What to do with your tax refund

Pay Past, Present and Future with Your Refund

Dreaming about the tax refund

Pay Past, Present and Future with Your Refund

Speculating about how your refund can be best spent can be a fun pass-time almost like considering how you might spend any other windfall that might come your way.  Everyone chimes in with their own wishes:  "how about a new TV or a game system, or paying off debt".  While you want to enjoy a little of the bounty that comes your way, it is also important to balance debt reduction and savings as well. 

Having a plan before the money arrives can ensure you get the best use of the funds.  Without a plan, you may find that in two months that you are not financially better off than you were before the refund.  Our temptation is to spend the money on current wants and desires while leaving debt and savings as they were before the bounty.  This is the year all that changes!

Virginia Saves recommends using the 30-40-30 plan to address your past, present and future with your refund in 2011.  It is a simple plan and works like this:

PAST:  Earmark 30% of all of your refund to debt reduction and catching up on past due bills.  This can be a great way to start power paying your debt.  Power paying your debt can accelerate your journey toward financial freedom and increased savings.

PRESENT:  Dedicate 40% of the refund to current needs and wants.  Need that car repaired or wishing for a new computer?  This is the money that can be used to improve your quality of life right now allowing you to splurge and enjoy some of the proceeds.

FUTURE:  Finally put 30% of your tax refund into a savings plan.  This can help jumpstart that emergency fund or be used for larger purchases later. 

There you have it.  A plan to address past, present and future with your refund.  If you use this plan, you will surely find your future looks brighter.  Don't forget to join the saver's movement at www.virginiasaves.org/enroll.  Together we can make our personal economies stronger!

Why build and emergency fund?

Saving for Emergencies is a sound choice. Having an emergency savings fund may be the most important difference between those who manage to stay afloat and those who are sinking financially. That’s because maintaining emergency savings of $500 to $1,000 allows you to easily meet unexpected financial challenges such as:

• repairing the brakes on your car
• buying your child a new pair of needed shoes
• replacing a broken window in your house
• paying for a visit to the doctor when your child has the flu
• covering the dental expense of filling a painful cavity
• paying for a parking ticket
• flying to visit a sick parent.

The emergency fund not only allows you to cover these expenses, it also gives you the “peace of mind” that you can afford these types of financial emergencies. Not having an emergency savings fund is an important reason that many individuals borrow too much money at high interest rates. For example, with emergency savings, Americans probably would not have to take out $2 billion a year in payday loans at interest rates that average 300 to 500 percent.

To read more check out Build Your Emergency Fund.

Fresh Financial Start for the New Year!

It is a New Year and time for a Fresh Financial Start! 2011 can be the year the finances get into shape, but it will not happen automatically. If the desire is to be in a better financial standing in at the end of the year, then some of the spending habits will need to be different during the year. Small changes over a period of time equal some impressive results.

Small ¢hanges x 12 months = Impressive Re$ults

It is all about the choices being made on a daily basis. For example, the extreme vow not to visit Starbucks in 2011 probably will not be successful. Simply cutting the fancy coffee mornings in half, ordering the regular coffee, or making coffee at home will save some dollars that really add up!

Where can extra money for savings be found? Look at how money is spent now and where small changes can be made.

·         Save change in jar

·         Bring a bag lunch several days a week

·         Buy a reusable water bottle and refill at home

·         Plan meals to prevent fast food runs at 6 PM when the kiddos are hungry

Little by little, collect money not spent during the week. Plan how to use the money saved or it will be accidently spent. A savings account is a good place to save money for unexpected emergencies. The emergency savings help Virginia Savers improve their current and future financial situations.

The ¢hange saved today will change the future for the better!

Kick Start Your Savings Series - Emergency Fund

This post is part of the Virginia Saves Kick Start Your Savings Summer. Each week we'll
 focus on saving for a particular savings goal or how to save on everyday expenditures. 
To kick start your own savings click here.For beginning and more advanced savers, nothing is more important than the emergency fund. As the cornerstone of your savings plan, an emergency fund is your protection against unexpected, but inevitable, expenses.

Step 1- Figure out your goal & a place to save. Having an emergency savings fund may be the most important difference between those who manage to stay afloat and those who are sinking financially. That's because maintaining emergency savings of $500 to $1,000 allows you to easily meet unexpected financial challenges such as a car repair or medical bill and avoid high interest, short-term loans. With your emergency fund goal in mind, decide where you want to save it. Do you need to open a savings account? Do you want to add to a savings account you already have? Determine your goal and where to keep your emergency savings.

Step 2 - Save automatically. Have a portion of your paycheck, as little as $50 a month, transferred automatically from your checking to savings account. Individuals who save automatically are more than six times more likely to be successful long-term.

Step 3 – Track your progress. By enrolling as a Virginia Saver, you can utilize the Virginia Saves Savings Tracker for free to record deposits and monitor your progress. If you’re not sure where to find the money to start saving, cutting down expenses can be easier than you think. Institute a “no-spend day” and for each dollar you don’t spend, add to your emergency fun. Stay tuned for next week for even more ways to save on everyday expenditures!