When it comes to saving, making a few small adjustments can make a big difference. Start by adjusting your daily habits, cutting monthly bills and using tools that automate savings.
Having a good savings plan in place can help you save more money faster. It can also prepare you for emergencies and retirement.
Pay yourself first.
Many people struggle to save money and are often juggling multiple financial obligations such as bills, health insurance, credit card debt, retirement savings and more. This makes it difficult to find time to put aside extra money for savings and investing.
The Pay Yourself First (PYF) strategy is an effective way to set aside a portion of your income for savings or other financial goals, such as an emergency fund or paying off debt. By making savings a priority, you can make sure that you don’t neglect it and are prepared for anything that comes your way.
One of the perks of this strategy is that it can be easy to implement, even if you’re on a tight budget. To get started, you’ll need to decide how much you can afford to save and then set a savings goal.
Once you’ve determined how much you can afford to save, you can start setting aside money every time you receive a paycheck. You can do this by setting up a recurring transfer from your general checking account to your pay-yourself-first savings account each month or pay period.
This strategy is best for people who are able to set aside money in a separate savings account and are committed to using the money for specific purposes. If you’re trying to save for a large purchase, you might want to set up a high-yield savings account instead.
It’s also a good idea to consider whether paying yourself first is the right option for you. If you have toxic debt, for example, you might not want to prioritize your savings over paying down that debt.
As with any financial goal, it’s important to consider the time frame in which you want to achieve your goals. Savings can take a long time to pay off, so you might want to pay off a debt first before diverting funds to other goals such as a vacation or a new car.
It’s also a good idea to set aside a specific amount of money that you’re willing to commit to saving each week or month. This may not seem like a lot, but it’s enough to get you started and will give you a sense of progress over time.
Set a savings goal.
A savings goal is a great way to make the most of your savings. It can help you build up an emergency fund, pay for a college education, or save toward retirement. The key to success is making sure that your goals are attainable and specific.
The first step in setting a goal is to identify what you want to achieve, says Shannon McLay, former Merrill Lynch financial advisor and founder of The Financial Gym. It’s important to have a clear idea of what you want to achieve so that it will motivate you to save, she says.
You’ll also want to decide how soon you’d like to see the goal come to fruition. For example, a short-term goal might be saving six months’ worth of expenses in an emergency fund. A long-term goal might be buying a home, investing in your retirement or planning for an overseas trip.
Next, consider how much you’d need to put away each month in order to reach your goal. It’s best to aim for a percentage that you feel comfortable with, and that will keep you from feeling too discouraged.
For instance, you might set a goal to save 20 percent of your income. This might sound like a lot, but it’s actually quite achievable.
Once you’ve decided on how much to save, it’s time to set up a timeline for when you’ll reach your goal. Knowing the time horizon for your savings will help you choose the right investment products to use.
Another important factor to take into account is the size of your budget. For example, if you’re earning an income of $100,000 a year, it may be more appropriate to save at least 20% of that amount.
To save that much, you’ll need to cut your spending significantly. For example, if you buy lunch at work every day, try to switch to bringing your own from home instead.
You can also set up a separate account for each of your goals, and deposit your money there, to help you avoid the temptation to dip into one part of your budget to pay for something else.
Automate your savings.
Saving money can be tough, but automating your savings can make it easier. It takes the decision-making out of saving, freeing up time to focus on other priorities.
Whether you’re looking to fund an emergency fund, save for a splurge or build a retirement nest egg, automated savings is a great way to get started. It can be as simple as setting up regular transfers from your checking account into a savings account.
Automating your savings can also help you stick with a financial plan and avoid financial stress. Putting money away each month for a long-term goal can give you peace of mind and financial clarity, says Kate Harzog, financial planner at SmartMoney in San Francisco.
To maximize your savings and ensure it grows faster, consider reassessing your savings goals every so often. As your cash flow changes, you may have new opportunities to reallocate money to savings, which can help you reach your goals more quickly, says Mike Ouyang, a spokesperson for LendingTree, an online loan marketplace.
Another way to boost your savings is to use an automatic deposit service, which can transfer a set amount of money from your checking account into a savings account. Depending on your bank, you can set up a recurring transfer that occurs on a daily, weekly, biweekly or quarterly basis.
If you’re self-employed, setting up an automatic transfer can be especially helpful since it can help you avoid late fees. It’s important to check the terms and conditions of any transfer services, which can vary by bank.
It’s also a good idea to check for any fees associated with the accounts you choose, which can be added on top of your monthly contributions. Some accounts have minimum balance requirements or may charge monthly maintenance fees.
You can also use a savings app that automatically transfers spare change from your everyday purchases into a separate account. This can be a great way to stash away even more cash, says Mason.
The best way to keep an eye on your savings is to review it regularly, according to Harzog. Reassess how much you’re able to contribute each month, and increase the amounts as needed to meet your goals. This can be as small as 1% or more each paycheck, which can significantly impact your financial well-being.
Keep the change.
One of the best ways to make the most of your savings is to save the change. You can do this by putting coins and bills in a change jar or bucket. This can help you accumulate the most amount of spare cash for your next big purchase, such as a new car.
Another way to save your money is by signing up for a rewards credit card. These cards typically offer 1% to 5% cash back on every purchase you make, which can be a great way to save.
To get the most out of this strategy, set up an automatic savings transfer from your checking account to your savings account. You can schedule the transfers to occur on a recurring basis, such as once per month or once every other week. This way, the money is automatically saved in addition to your other bills, without you having to think about it.
You might also want to consider using an app to help you manage your money. These apps can help you track your spending, monitor your savings, and even give you some nifty tips to help you reach your financial goals.
For example, some of these apps will alert you when your balance is low so you can take action to sock away some extra cash. Others will allow you to set a monthly budget and track your progress toward meeting it.
Whether you are trying to save for a down payment on a home or pay off your debt, the best way to save your hard-earned money is to put it somewhere safe where you can access it easily. There are plenty of apps to choose from, so find the best fit for your needs and start saving today!
