Even if saving has never been your thing and money is tight, the coming of a new year is an opportunity to change old financial habits. Here are some ways to become a more efficient saver.
Budgeting helps you organize your finances so you have money left over to save each month. It may seem laborious, but budgeting doesn’t have to be hard. Mobile apps cut a lot of the work and can help you track spending throughout the month. Try our free personal finance manager, Trends, to get your financial affairs in order this year. You can build a budget in minutes and automatically track spending for each category as well as create goals and get alerts.
2. Pay yourself first
Firmly commit to making a savings deposit monthly, even if you can only afford a small amount. Do this before paying your other bills.
If you’re not confident your resolution will stick or you want to simplify the process, automate your savings deposits. That way, a portion of your paycheck will automatically go to your savings account, or an amount you choose will be transferred from your checking to savings account each month. You won’t miss money that was never in your hands in the first place.
4. Make your money work harder
Compound interest is the interest paid on the interest your money earns in an account, and it allows your principal balance to grow faster. To fully benefit from compound interest, consider opening a high-yield savings account or a certificate of deposit that offers higher rates than the average savings account.
5. Plug up cash drains
It’s not always the big expenses that sabotage saving efforts; small expenses can add up and be a huge cash drain. To rein in spending and increase your cash surplus:
- Shop around for the lowest possible rates on utilities, insurance, TV, internet and mobile plans. Also, make sure you get discounts you may be entitled to.
- Check bank account statements for less obvious fees such as those for account maintenance, ATM use or having a low balance. If your accounts come with several fees, it may be time to find a financial institution that costs less.
- Monitor daily spending and cut back on extras like lunches out, donut runs or fancy coffee and make more of your favorites at home.
- Explore free and low-cost entertainment options such as the library, parks, and local museums.
6. Bring in extra bucks
When trimming expenses doesn’t do the trick, the only way to create enough free cash for saving is to increase what’s coming in. You can:
- Sell unwanted items online or at a yard sale.
- Cash in credit or debit card reward points.
- Ask for a raise or for extra hours at work.
- Take on an additional part-time job or turn your hobbies or skills into dollars through tutoring, yard maintenance, dog walking, writing, crafting, musical performance or handyman work.
7. Open Club Accounts
Never go into debt for the fun things in life. Save for vacations or extra holiday costs by directly depositing into Vacation Savings or Holiday Savings Accounts every month. You’ll earn interest while your funds wait for the good times to come around.
8. Lower your payments through consolidation
If you have several high interest loans such as credit cards, medical bills, pay day loans or any loan for that matter, consolidation allows you to turn those several monthly payments into one! By restructuring your debt, you’ll be saving money you didn’t even know you had.
The benefits of saving kick in very quickly and only get better with time. A solid financial cushion protects you during emergencies and provides the means to travel, buy a home, get an advanced degree, or pursue whatever other dreams you may have.
How do you plan on saving money this year? Tell us in the comments.