Saving is the best and most important way to make sure you’re financially safe when it counts. But how can you make saving easy in the current economic climate when many are struggling to cover their daily expenses.
Between the rising inflation rate, and increasing grocery and gas prices, people at all income levels are feeling the pinch in their wallets. In fact, over half of U.S. households cannot cover a $1000 financial emergency out of their disposable incomes.
While you may not have control over the economy, you do have control over the actions that you take. Here are 10 easy tricks you can use to become better at saving.
Set Savings Goals
One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for both in the short term (one to three years) and the long term (four or more years). Then estimate how much money you’ll need and how long it might take you to save it.
Include Saving in Your Budget
Now that you know what you spend in a month, you can begin to create a budget. Your budget should show what your expenses are relative to your income, so that you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance. Include a savings category in your budget and aim to save an amount that initially feels comfortable to you. Plan on eventually increasing your savings by up to 15 to 20 percent of your income.
Pick the Right Saving Account
There are many savings accounts that are suitable for short- and long-term goals. And you don’t have to pick just one. Look carefully at all the options and consider balance minimums, fees, interest rates, risk and how soon you’ll need the money so you can choose the mix that will help you best save for your goals.
Record Your Expenses
One of the first steps to start saving money is figuring out how much you spend. Keep track of all your expenses that means every coffee, household item and cash tip as well as regular monthly bills. Record your expenses however is easiest for you: a pencil and paper, a simple spreadsheet or a free online spending tracker or app. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’ve included everything.
Find Ways to Cut Spending
If you can’t save as much as you’d like, it might be time to cut back on expenses. Identify nonessentials, such as entertainment and dining out, that you can spend less on. Look for ways to save on your fixed monthly expenses, such as your car insurance or cell phone plan, as well.
Make Saving Automatic
Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so that a portion of every paycheck goes directly into your savings account. The advantage: You don’t have to think about it, and you’re less likely to spend the money instead.
Pay off High Interest Debts
You can’t save money if you’re shoveling most of your money into interest. Pay off all high-interest debt such as credit card debt immediately. Let’s say you’ve got $1,000 on a card at 18% ($180/yr interest bill) and, at the same time, $1,000 in savings earning 1% (giving you $10/yr). If you could pay off the card balance with your savings, you’d be $170 better off a year. It won’t be for everyone’s circumstances as it’ll mean your savings being used up in one go, but you won’t have the interest to pay.
Pay Your Bills on Time
Don’t waste money on late fees and penalties. Avoid late fees and interest charges on your credit cards, loans and other bills by always paying in full and on time. Paying late fees on credit cards can set you back as much as $40. If you pay your credit card late every month, aside from paying higher interest rates than you otherwise would on revolving debt, you could potentially spend $480 a year in late fees.
Reduce Discretionary Spending
Trim your discretionary spending without cutting out the fun. Meet your friends for happy hour rather than dinner. Change your Netflix subscription to the cheapest plan. Spend your free time on a hobby rather than online shopping.
Save Your Bonus
Make sure you have a plan for any additional money you receive in bonuses. If you haven’t yet built an emergency fund, use your bonus money to ensure you’re covered. This can give you peace of mind and a backup plan for anything unexpected that may come your way in the new year. Stash your bonus cash in a high-yield savings account and let the interest pile up.
So these easy money saving tips will have you keeping more of your money. But at the end of the day, building real wealth goes beyond just saving money. So don’t stop there. Make sure you also work hard to figure out how to earn more money.
What are some the money saving tips you have used?