Saving Money / Savings Tips
If your savings account seems thin or nonexistent, you’re definitely not alone. It has been reported that around 50% of people have less than three months of emergency savings, and a recent GOBankingRates survey found that a staggering 40% of women have less than $100 in their savings accounts. saving.
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Although the ability to save money sometimes depends on factors beyond your control, we spoke to several experts who offered a manual on how people with healthy savings accounts do it.
Set a monthly budget and stick to it
While budgeting might seem like the obvious answer, that’s because it works, according to David Frederick, director of client success and advice at First Bank. According to Frederick, an effective budget is your best tracking tool for how much an individual or household is bringing in, how much they’re spending, and how much they can save.
“Expenses are the variable that people can most easily control,” he said.
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Use advanced savings tools
If the only tool you use to save is a savings account, you risk missing out on earning potential, Frederick warned.
“While it is okay to put money in a savings account, there are often better accounts for long-term savings purposes. People concerned about retirement should save in a 401(k) or IRA. People concerned about health care costs should consider saving in a Health Savings Account (HSA). People saving for a child’s education should consider opening a 529 savings account.”
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Avoid and mitigate debt
One of the most effective ways to increase savings is to reduce debt, Frederick suggested. Although some debts are difficult to avoid, from mortgages to student loans, he urged people to pay off those debts as quickly and deliberately as possible.
“Also, harmful debts like credit card balances and payday loans should be avoided whenever possible,” Frederick said.
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Reduce lifestyle inflation
As we make more money, we tend to spend more money, a concept called “lifestyle inflation,” said Jeff Mains, CEO of Champion Leadership Group LLC, which helps entrepreneurs grow their business. It eats away at all the money we could spend on savings.
So, you should make it your goal to live below your means, says Amanda Howerton, Certified Financial Planner at RKCapital.com.
“People with the healthiest savings accounts are most often the ones who are truly living below their means,” she said. She acknowledged: “It’s so much easier said than done in the age of social media and targeted marketing, so the ‘wish list’ items you casually browse online appear daily. in advertisements.” However, it will be the difference between several thousand dollars over time.
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According to Brad Biren, Esq, LL.M., a tax law expert known as “DrTaxRefund,” the best way to ensure money gets to your savings account is to automate deposits.
“Calculate what would be a reasonable amount to allocate to savings and automatically transfer that amount into savings. This avoids forgetting and deciding not to.
Set savings deadlines
Additionally, Biren said, “There’s a certain magic that happens when you challenge a person to achieve a goal.” In other words, savings goals are more likely to get you to your amount faster.
“Assuming the goal is achievable, but a little stretched, it will probably become a new habit, as long as the discomfort of the race to save is not too high. For example, stretching or tightening the belt, savers realized they could live happily with less, don’t stop them, keep it up.
He recommends incremental savings goals rather than larger goals for more consistent success and a chance to celebrate accomplishments.
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Organize short and long term financial goals
It may be more effective to have multiple levels of goals, said Amanda Sullivan, research analyst at CreditDonkey. “People who have a healthy savings account have it for a purpose. Whether it is a mortgage, a car loan or a retirement fund, the money in their banks is used for short or long term financial purposes.
Most likely, they will do this using the bucket savings strategy, where a certain amount of money is set aside in pursuit of a certain goal.
Goals provide a concrete reason to save, said consumer credit expert Tanya Peterson, vice president of branding at Freedom Financial Network, a digital personal finance company. “When you work on things that are important to you, whether it’s saving money, exercising, breaking a bad habit or whatever, you dramatically increase the chances of that happening.”
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Look for small ways to save
Smart savers typically look for small ways to save, Petersen laments. “These little ways to work on building a smart spending habit and keeping that focus on your goals. It could be making coffee at home instead of buying expensive lattes or hanging clothes to dry instead of using the dryer. The little things will add up and apply to larger expenses as well.
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