Trying to put away some savings when your income is already stretched to its limit may sound impossible, but it’s not. The key is to keep your goals small and to become hyper-aware of your family’s personal spending traps.
Here are five simple ways to start your savings project:
1. Start really small. It’s OK to save what feels like a ridiculously small amount of money at first—even as little as $5 a week. That may not seem like much, but even small amounts add up over time. You want to make sure your goal is achievable and that you’re saving consistently, which you probably can do if you’re only saving $5 a week. When you’ve shown yourself that you can successfully save for a few months, you’ll have the confidence to slowly increase the amount you’re setting aside.
Have your bank or credit union automatically transfer the money into your savings account once a week, or use an online savings account (Capital One 360, Ally Bank, Discover, and GoBank are a few). It often takes a day or two to transfer money from your online savings account back into your checking account, so you won’t be as tempted to use it for impulse purchases.
2. Rethink ongoing expenses. Take a closer look at your car loan, homeowner’s/renter’s insurance, cable TV/Internet plan, cell phone bill, and other recurring charges. One by one, see if you can modify your plan or negotiate a better deal. Add any savings directly into your new automatic savings plan. Because you likely pay these expenses without even thinking about them, any savings here will feel like “found money.”
3. Gently increase retirement savings. You’re probably not putting the recommended 15 percent to 20 percent of your pay into your workplace or self-employed retirement plan. Although this is savings you won’t access for a long time to come, it’s still important. Make a commitment to increase your contributions by just 1 percent each year. Up your contributions around the time you get your yearly raise and you’ll barely even notice the change. Plus, your employer may match a certain amount of your contributions. That’s essentially free money. Don’t turn it down.
4. Take a closer look at your food budget. This is an area where many families have more flexibility than they think, but it’s also a budget they’re reluctant to change. Give your food bill some extra attention for a month or so. Can you cut just $5 or $10 out of your weekly charges? If so, that money can go toward savings. You don’t need to become an extreme couponer, either. Simply look at the one or two most expensive items on your grocery receipt and ask yourself if there’s a way to cut them back. Are you spending a lot on deli meat for sandwiches? Start roasting a whole turkey or cooking a ham once a month, slicing the meat, and freezing it. Do you splurge on convenience foods when you’re too tired or busy to cook? Start cooking a double dinner batch once a week and freezing half of it for a hectic night.
5. Use credit card rewards wisely. If you’re using a credit card that offers cash-back rewards, start mentally considering these points as savings rather than as splurge options. Once you’ve accumulated enough points to earn cash back, redeem it. Put the money immediately in savings instead of using it to buy those tempting gift cards for restaurants or other places that sell non-necessities. If, for some reason, you must redeem your points for gift cards or merchant discounts, earmark them for holiday and birthday gifts. Take a corresponding amount of money out of your checking account or gifts budget and tuck it into savings. Voila! Your credit card just helped you add to your savings account.
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