3 Questions That Will Help You Save More Money
Americans aren’t saving enough money.
Just 22% of us have six months of expenses saved while nearly 30% have no emergency savings at all, according to a survey from Bankrate.com. That’s surprising because “spending less and saving more” have ranked in the top 5 on Nielson’s list of most popular New Year’s resolutions in the last two years.
Clearly, we want to increase our savings but feel like we can’t. Maybe you can relate. Your income is tied up in bills, insurance and day-to-day expenses. And you wonder, How am I supposed to save on top of all that?
Even if it feels like you don’t have any cash to spare, you can save more this year. Find out how with these three simple questions:
1. What are my saving priorities? Successful goals start with a plan. Determine what you’re saving for before you do anything else. Here are some savings priorities to cover first:
- Emergency Fund. Start by getting $1,000 in the bank. Then get rid of all your debts. After that, bulk up your emergency savings to three to six months’ worth of expenses. This should protect you in the event of a job loss, death in the family, or a stray baseball finding it’s way through your living room window.
- House Down Payment. After you’ve fully stocked your emergency fund, you may be ready for a place to call home. (If you’re already a proud homeowner, skip this step and go straight to retirement savings.) To avoid private mortgage insurance, save 20% of the purchase price. If that’s too much, aim for at least 10%.
- **Retirement.**We recommend investing 15% of your household income in good growth-stock mutual funds. That doesn’t include your company match—that’s icing on your future cake!
2. What else do I want to save for? Sooner or later, you’ll have some other savings goals to meet. If you have a child graduating high school in a few years, you probably want to bulk up their college fund. If your decades-old car is barely hitting 70 mph anymore, it’s time to think about a replacement. Save for the following purchases as they make sense for you:
- Kids’ College
- Car Replacement
3. Where do I find the money? Now that you’ve decided what you’re saving for, it’s high time the Savings Fairy dropped in for a visit, right? The hard truth is she isn’t coming. You have to save this money—no one else can do it for you. But that’s okay, because you’ve so got this.
Make a budget. First, figure out where all your money is going. Create a monthly budget so you can better understand your monthly income and expenses.
Pay yourself first. After you get paid, put the amount you want to save in a separate account (or retirement vehicle) and don’t touch it! Do this before you assign yourself that restaurant money or haircut allowance.
Trim your budget. Replace a few meals out with some Crockpot recipes, buy generic paper products, and shop used. There are plenty of simple ways to save on the day-to-day.
Sell items you no longer need. We all have closets (or entire attics!) full of forgotten snow boots, sunglasses, clothes, toys and electronics. Here’s a good rule of thumb: If you haven’t seen it—or missed it—in a year, get rid of it. A good way to cash in your clutter is to host a weekend yard sale.
Apply your raises, bonuses and cash gifts. Most of us will earn some sort of extra cash this year. From now on, pretend you didn’t get that raise or bonus. Instead, put it directly into savings. You won’t know the difference and you’ll give your savings an easy annual boost!
Try a temporary spending freeze. Give yourself a quick win via a short-term spending freeze. Rather than eating out or buying new clothes, direct all that money toward your savings goal. This is a great way to save for Christmas gifts or vacation cash.
When you make a budget, you know exactly where your money is going each month. Finally! That means you can direct more of it toward whatever you want—including your savings account. The key to saving more money this year is you!