When it comes to saving money, we all could do a little better. On average, the personal savings rate in the United States hovers around seven percent. During times of uncertainty, like the COVID-19 pandemic, consumers tend to save more as they look for ways to stretch their dollars to cope with the crisis. Instead of taking a defensive stance, be intentional about your saving by creating an actionable plan. Saving money does not need to be complicated. Often the small, incremental steps that add up over time can create the biggest impact. Which of the steps below will you incorporate into your personal saving plan?
Pay yourself first
Before paying any bills this month, make an investment in your own financial future. Whether you set up payroll deductions to a 401(k), monthly transfers into holiday spending fund, or split your direct deposit into separate checking and savings accounts – making a commitment to saving money is a great first step. Automating saving is the easiest way to build and maintain a savings habit.
A penny saved is a penny earned
The next time you reach for your wallet or smartphone app to buy something, think about the cost of that purchase in terms of hours worked. Reframing the expenditure in this way may give you pause. You might be willing to part with an hour’s worth of earnings for takeout food, but exchanging a week’s wages for a pair of shoes could stop you dead in your tracks. You work hard for your money; make sure you make wise decisions about how you spend it.
Time is money
When it comes to saving, time is your friend. The more time you have to stash away cash and let it grow through compound interest, the larger your balance will be. Maximize your saving effort by looking for an account that provides the highest earnings possible while remaining liquid (easy to access without penalties or fees). Timing is everything when it comes to resisting those spending urges. When you embrace delayed gratification, you may find that you can find cheaper alternatives or simply do without.
Waste not, want not
Have you ever shopped in your own closet? Do you relish creating new meals from leftovers? Are you a fan of thrift shops? You’d be surprised how quickly small money-saving measures can impact your bottom line. Whether you save what you would have otherwise spent or earn extra income from a side gig or selling gently used household items – get creative with saving strategies that cash in on your thriftiness.
A bird in the hand is worth two in the bush
Building a nest egg has many benefits. When you build margin into your finances, you have the peace of mind to weather a crisis, making better decisions without feeling pressured to turn to costly debt. Whether you are saving to purchase your dream home, fund a tropical vacation, or sustain a long retirement – it’s important to keep your eye on the prize. Think about the trade-offs you may need to make along the way to make your financial goals a reality.
For further savings inspiration, explore the rich content of our financial education tool Enrich.