Saving Smart, Saving Bold
Strategies for commencing savings, applicable even for fresh beginnings.
Mastering the art of saving doesn't have to be a Herculean task - even a minimal bank balance can set the foundation for a promising financial future. Armed with the right mentality, tools, and techniques, you can transform your saving habits and watch your fortune soar.
Here's the lowdown: 4 in 10 US adults are capable of footing a $1,000 emergency bill with cash savings, as per our website's latest annual emergency savings survey report. But do you need more dough to start saving? We say no! Here are seven coups that can help you kickstart your savings right now.
1. Lock down your motivation
What are you saving up for? If you haven't got a clue, it's high time to set your sights on a tangible goal. Whether it's establishing an emergency fund, nabbing a down payment on a dream home, or planning that long-awaited sojourn, clear goals are the secret weapons that can keep you energized and on track.
Jot down your savings targets, name 'em, and assign deadlines. Then, figure out your monthly contribution needed to reach your goal by the given deadline. Need a boost?
Pro Tip: Differentiate savings accounts for each goal
According to Hanna Horvath, CFP and our website's Managing Editor, keeping separate accounts for each target can help you monitor progress and stay organized. Plus, you can easily transfer funds to the account that yields the highest return.
2. Create a budget that's tailored to you
You don't have to be a spreadsheet whiz to hold the reins of your budget. A budget, simply put, is a guide to ensure your spending does not exceed your income. The secret? Finding a budgeting method suited to your lifestyle and personality.
One popular technique is the 50/30/20 rule. Here's how it works:
- 50% of your earnings cover the essentials (like housing, nourishment, and healthcare)
- 30% goes to non-essentials (such as dining, hobbies, and streaming services)
- 20% is allocated to savings and debt repayment
Ready to roll up your sleeves? Observe your income and expenses for a month, then classify them as essential, non-essential, and savings-related. Compare your spending against the 50/30/20 breakdown. If you're overspending in certain categories, it's time to trim back or restructure your budget.
Another anti-impulse shopping weapon: the 30-day rule. Wait 30 days before making any non-essential purchases. This timeframe gives you a moment to weigh the cost against your desires, making it less likely that you'll succumb to impulses.
3. Eliminate high-interest debt
High-interest debt - picture credit card balances - can be a serious hurdle in the race to save. A recent survey by our website reveals that over half of American credit cardholders carry a balance from month to month, with rates often ranging between 20 and 30 percent.
Take this scenario as an example: You've got a $5,000 credit card balance with a 25% APR. Even if you dish out $300 a month, you'll cough up an extra $1,579 in interest before zeroing out the balance. That's cash that could've burrowed into your savings.
Though it may not feel like busting debt boosts your savings, eliminating those pricey interest charges frees up more dough to direct toward your goals in the long haul.
4. Prioritize emergency savings
Crises lurk around the corner. Whether a car repair, medical bill, or job loss strikes, an emergency fund can be your guardian angel. Aim to stash enough to cover three to six months' essential expenses in a separate, easily accessible account.
Set small targets if you must - even if it's $50 or $100 a month. The vital thing is to make emergency savings a consistent habit.
Curious for more deets? Check out this post on building an emergency fund.
5. Automate your savings
The easiest way to ensure consistent saving? Make it automatic. Set up recurring transfers from your checking to your savings account each payday. This wards off the temptation to tap your savings and instills discipline.
Many banks also offer tools such as round-up programs that automatically tuck the leftover change from your debit card purchases into your savings. Over time, these small amounts can snowball into substantial savings.
Keen on giving automation a whirl? Explore savings apps like Digit or Qapital, which analyze your spending behaviors to move small doses of cash into your savings when you can spare it.
Pro Tip: Keep checking and savings accounts at different banks
If the temptation to raid your savings for manic spending sprees lingers, establishing separate accounts at distinct banks creates a mental moat between your spending funds and savings.
As Pamela Capalad, a certified financial planner and owner of Brunch & Budget, put it: "When you open your bank app and your checking and savings amounts are visible, you're likely to consider the total as your spendable cash. But if they're completely separate, the numbers might slip your mind."
6. Find wiggle room in your wallet
Saving more doesn't necessarily entail earning more. Delve deep into your spending habits and locate areas where savings can sneak in. Part with unused subscriptions or regretful impulse buys and steer the savings toward your emergency fund.
Gearing up for a comprehensive spending audit sounds monotonous? Give in to the power of temptation bundling. Pair a tedious task (like reviewing your budget and canceling unnecessary subscriptions) with a reward you adore (a favorite podcast).
Mariel Beasley, co-director of Common Cents Lab - a financial research lab at Duke University – explains, "You create a way to reward yourself for completing an unpleasant but vital activity."
Seeking additional dosh? Check out side hustles, selling surplus items, or depositing gift money directly into your savings.
The bottom line
Embarking on your saving journey might seem overwhelming, but remember: every penny counts, even the tiniest sum. By setting tangible goals, creating a personalized budget, vanquishing high-interest debt, automating savings, and managing funds wisely, you can lay the cornerstone for long-term financial security.
Embrace the mindset that your saving efforts count, no matter how small. Stay receptive to experimenting with different strategies and tools until you discover the ones that align with your unique financial landscape and temperament. With relentless resolve and creativity, turning saving from a chore into a gratifying habit is merely a step away.
Speaking of savings, check out our picks for the best savings accounts to help you get started on the right foot.
- Setting separate savings accounts for each goal, as suggested by Hanna Horvath, CFP and our website's Managing Editor, can help you monitor progress and stay organized in your saving efforts.
- By finding a budgeting method that suits your lifestyle and personality, such as the 50/30/20 rule, you can ensure your spending does not exceed your income, thus contributing effectively towards your savings.
- Eliminating high-interest debt, like credit card balances, can free up more money to direct toward your savings goals, as high-interest rates can take a substantial portion of your savings in the long term.
- Prioritizing emergency savings is crucial as it can serve as a safety net during financial crises, and aiming to stash enough to cover three to six months' essential expenses in a separate, easily accessible account can provide peace of mind.
- Automating your savings by setting up recurring transfers from your checking to your savings account each payday, or using apps like Digit or Qapital, can help instill discipline and ensure consistent savings. Keeping checking and savings accounts at different banks can also create a mental moat between your spending funds and savings.
