It takes a certain amount of discipline to build a healthy savings account. Some say you should aim to save 20 percent of your earnings, but CNBC reports that about 5.5 percent is the norm for most people. Clearly, 20 percent can be a real challenge, especially if you’re dealing with a tight budget. Here are a few tips and tricks to help you along.
When unexpected money comes your way, it can be tempting to splurge, but discipline really is the name of the game. When you get a raise, or receive your tax refund, your first thought might be to upgrade your car or apartment or splurge on an expensive item. If you can’t bring yourself to drop that whole refund in a savings account, at least save most of it.
You may have heard that you should pay yourself first, and this really does help. Money you never really see is much less easily spent. Decide how much you want to save out of each paycheck. Even if it’s only $10, that’s better than nothing, especially if you’re saving in other ways, too. Now set up direct deposit for that amount so this portion of your earnings goes straight to your savings account, not to checking. Many direct deposit systems can be set up to accommodate more than one account so you can have your money divided between the two.
If direct deposit isn’t available to you because your employer writes you an old-fashioned paper check each pay period or you pay yourself because you’re self-employed – consider “reversing” your deposits. Instead of putting the money into your checking account to pay bills and cover discretionary spending and then move a portion of what’s left into your savings quota later, switch it around. Deposit your earnings into your savings account, then transfer what you need for bills and spending to checking. Again, you’ll be less likely to dip into money that never finds its way to your checking account in the first place.
It’s one of the oldest tricks in the book, but it works. If you stop on your way to work for a cup of coffee and it costs you $2.70, you might hand over $3 and get 30 cents back. Drop the change into a jar at the end of the day. If you add just $2 in change every day, you’ll have $60 at the end of the month and more than $700 at the end of a year. Transfer the jar’s contents to your savings account periodically – or don’t. You’re probably less likely to dip into savings that are in the form of dimes and quarters jammed into a jar.
This is a variation on the change jar approach. Whenever you hit the ATM, commit a percentage of what you withdraw to savings. If you take $50, set $5 aside. Put it in that change jar or in an envelope tucked into your sock drawer. You’re probably not going to pay for your next cup of on-the-go coffee with 11 quarters, you might be tempted to grab five bucks out of that envelope when you need a little cash. Put the cash out of reach and move it into your savings account as it accumulates. Also make sure to stick to your own bank’s ATM when possible. It costs money out of your account to use others, and that’s money you could be saving instead.
Saving is the opposite of spending. If you do a lot of one, you’ll do less of the other. If you spend less on various monthly expenses, you can divert the difference to your savings account. Maybe you’ve got a tradition of treating yourself to dinner out every Friday night. Skip one week and put what you would have spent in your savings account instead. Cut back on unnecessary services like that mega cable package if you’ve never watched all the channels and evaluate your Apps and digital subscriptions – you may be spending on things you don’t realize! Deposit what you would have spent into savings.