In a previous blog post, we discussed ways to improve your personal financial health and the role that saving money plays in your long-term financial planning. Though we may be aware of how beneficial and crucial a savings account can be to prepare for those rainy days that somehow didn’t show up on the forecast, how can we maximize that savings potential and get the most bang for our buck?
Let’s discuss five effective ways to reach your savings goals and help you prepare for those potential unexpected gloomy forecasts ahead!
1. Make Savings a Priority
Most often, individuals pay their recurring bills and other expenses and leave what remains, if any, to set aside for their rainy-day fund. We encourage you to shift your mindset on this. By following this practice, your savings becomes an afterthought. When building a savings, it needs to come off the top of your paycheck. As suggested by Smart About Money’s website, prioritizing money for your savings helps prevent you from being “tempted to spend it” or allocating it to other expenses. With every paycheck, immediately take out your savings contribution before moving forward with the rest of your expenses.
2. Take Full Advantage of Banking Benefits
Allow your money in savings and the money you spend on your day-to-day purchases to work for you by earning you interest—no extra work from you needed!
- To really boost your savings potential, choose a bank with an account that will earn you interest on the money you deposit. Most commonly, banks offer savings accounts that earn interest on balances, meaning your money will earn interest just by being there.
- Take advantage of the money you can acquire with cashback opportunities. Many credit card companies and banking institutions offer credit cards with rewards or cashback benefits with no annual fees (e.g. Bank of America, Discover, Citi, etc.). Some banks now offer debit cards that earn cashback rewards just by using the card (e.g. Discover, USAA, etc.). Any cashback rewards you receive is money you can invest into your savings.
3. Revisit Your Budget Frequently
In order to boost your savings and emergency funds, you’ll need to commit to frequently revisiting your budget. Why? If your circumstances change from month to month, it may free up some income to invest into your savings—just be sure to resist the urge to spend what extra money you discover already in your budget! Here are some examples of some recurring changes you may experience:
- Recurring monthly expenses may terminate from month to month. For example, you may have paid off a credit card, freeing up the monthly payment amount in your next monthly budget. Throw that amount right into your savings!
- Your preferences and needs change frequently. By combing through your budget often, you may find areas where you are spending in excess that could be reallocated to your savings account. According to Robert Farrington from The College Investor, making changes like opting for prepaid cell phone plans could save you $50 or more a month! Minor tweaks to your spending habits like this will quickly boost you towards your savings goals.
- Any increases in income (e.g. bonuses, larger commissions, pay rises, etc.) gives you more money to budget. An increase in income should be an increase in the amount you save.
4. Increase Your Monthly Income
This may seem obvious, but hear us out. Having an increase in pay at work will certainly boost the amount of money you have to budget, allowing you to invest more into your savings goals. However, it is not the only way you can increase your income. Consider what else you can do to supplement that income:
- You can pick up a part-time job or start your own business in addition to your day job.
- Sell items you no longer use or don’t need. You’ll be surprised how much money you can make on selling off things that may be collecting dust, when they could be collecting your money.
5. Be Consistent
The biggest influence on boosting your savings and emergency funds is being consistent with your savings habits and with taking these actions. If an emergency arises and you use your emergency fund, don’t sweat it; that’s what it’s there for. Just be sure to diligently work to build it back up, even if that means skipping happy hour with friends for a couple weeks.
If you know consistency is difficult for you, be sure to take advantage of automatic payments offered by most banks to transfer money into your savings after paydays. You can set up the automatic payments and not have to worry about forgetting them. If remembering to frequently revisit your budget gets lost in the shuffle, set a reminder on your phone with a notification, and treat it like a work meeting with yourself. You wouldn’t miss a meeting with your boss, right? Use the same level of dedication with your own money.