5 Great Tips for Increasing Your Savings
Car repairs, COVID-19 tests, and cavities have one thing in common: When you need to deal with these issues, you better be ready to handle them right away. A well-maintained savings account can give you the financial cushion to handle emergencies. Here are five easy ways you can increase the amount of money you’re saving so you’ll be ready for whatever life throws at you.
Analyze Your Expenses
To start saving, you have to stop spending. That’s easy to say but hard to implement. Crafting a budget doesn’t mean cutting out everything you enjoy doing; it means setting reasonable limits and finding satisfactory substitutions. For example, using a prepaid cell phone plan could save you hundreds of dollars a year while still leaving you with all the data, texts and calls you want. Likewise, hosting friends instead of going to eat lets you save money without destroying your social life.
Create a Budget
To make a budget, use bank and credit card statements to analyze your monthly expenses then look for places you can downsize. You might be surprised by how much money you’re spending each week on quick meals or mindless shopping that you don’t actually enjoy. Take note of your favorite activities, even if they’re expensive, and plan around them. If you love your local gym, keep your membership, but cut back on on-site smoothies or new work-out gear for your home.
Automate the Process
What if every time you got a paycheck, some of the money was magically whisked away to your savings? It would be a lot easier to increase your savings if you didn’t have to think about transferring your hard-earned cash out of your checking account and into your emergency fund. Luckily, you have a few ways to automate your savings. First, check if your bank offers recurring transfers; if your accounts have this feature, simply set up a recurring transfer for every pay day. You should also research splitting your check into multiple accounts via direct deposit. Your employer might allow you to deposit 90 percent of your pay into one account and 10 percent into another, meaning you can squirrel part of your money away without even thinking about it.
Think About Taxes
Use tax-advantaged retirement plans to stretch your savings even further. According to the Internal Revenue Service, you can save $6,000 a year in an Individual Retirement Arrangement, or IRA, and you can save even more if you’re 50 or older. If you use a traditional IRA and deposit pre-tax dollars, you’ll save twice: first when you put money into the account and second when your taxes are due. That’s because the money you put in a traditional IRA isn’t taxed until you withdraw it years in the future. The $100 you put in a traditional IRA might save you $110 or even $120 overall.
Capitalize on Company Contributions
If your job offers an employer-sponsored retirement plan, you might have even more options to easily add to your savings. Many companies will match some of the money you put into your retirement account, meaning you get an instant return on your investment and a big boost to your total savings. For example, if your company offers a 5 percent match, you can put 5 percent of your salary into a 401k or other retirement account and your company will put another 5 percent of your salary into the account at no cost to you. The average national match was 4.7 percent in 2019 according to CNBC, so check your pay stubs and ensure you’re not leaving free money on the table.
Hopefully, you rarely encounter a financial emergency. With these simple tips to increase the amount of money you’re saving, you can breathe easy knowing that you’re prepared to handle any urgent financial issues you encounter.