If you look at headlines, you’ll come to discover some startling statistics. You’ll read titles that share how 47% of Americans would have trouble finding $400. Or how 2/3 of Americans would struggle to cover $1,000 crisis.
I’ve heard many reasons why people don’t and can’t save. The two that are often shared with me is how impossible it is to save after paying bills and “banks don’t pay much on savings accounts.”
Savings are important. It gives you peace of mind and security. A savings account is stored money for future purposes. It’s also stored money that can be used for emergencies.
Saving money starts with believing you can save. It’s a shift in your mindset that improves your relationship with money. But it requires taking specific actions that change behaviors leading to a habit of savings.
First, let me share with you that everyone can save money. Second, I believe you can save money too. Saving money isn’t just for people who have money. In fact, people who have money are the ones who save money.
And finally, saving money must become a priority for you no matter what age or career stage you are in.
Sure the sooner you start saving the more your money will grow. This happens due to the power of compound interest. Compound interest is when you begin to earn interest on the interest you’ve earned with your principal savings amount.
Here are my tips to help you prioritize and save money today.
Pay yourself first
This is a personal finance rule you’ve heard repeated many times. Every payday you must pay yourself first. You pay yourself first by transferring small amounts of money into a savings account. Start with a rainy day fund with a $500 goal as part of an emergency savings strategy.
Make it easy on yourself and set up automatic transfers when your paycheck hits your checking account on payday. Open a savings account with your current financial institution or one of the high-interest online savings accounts.
Automate your savings
The first step is having the automatic savings transfer happen when you first receive your paycheck. But you can set up multiple savings accounts and use automation tools to help you even further. For instance, set up an emergency fund, vacation club, a car fund or any “named” savings accounts. Then use the online banking tools to make the transfers on payday.
Additionally, you can use apps that help you save while you spend or based on behavior. Apps like Acorns helps you save money by rounding up your purchases, Qapital enables you to create IFTTT rules so if you happen to run for 1 mile today it’ll transfer a set amount for you. Or you can keep it basic and just set up weekly savings transfers from your checking into savings accounts through online banking.
Find money to save
There are a few ways you can lower your expenses and use the savings to save money. Think about reducing your expenses, negotiating bills, canceling subscriptions, and consolidating debt payments.
Start with listing all your expenses. This can be done through a financial analysis of your spending (a part of the budgeting process). Once you know where you’re money is going and how much you’re spending then it’ll be easier to tackle the reduce, negotiate, cancel and consolidate rule.
You can learn how to lower your monthly expenses in this article. Once you lower some of your expenses you then use those “savings” as your monthly contributions to your savings accounts. For example, reduce your cell phone bill by $10, then you have $10 to put into your emergency fund. Are you not comfortable canceling subscriptions or negotiating? Use a service from Trim to help you. You only pay when they can actually save you money.
Have a budget
And of course, budgeting is going to help you more than constricting you. Having a budget will help you allocate your dollar towards your expenses and goals. It’s a visual representation of your choices. It’ll keep you focused on the actions that support your long-term goals.
A budget doesn’t have to be complicated. Learn how to start the budgeting process easily with this article. You’ll begin with an analysis of your current situation, goal setting, create actionable items, set systems and use financial tracking apps to track your progress and monitor your spending.