It is suggested that everyone has about three to six months income saved away as a “rainy day” fund, but the average American has far less than this amount saved. According to a recent poll, 57% of American’s have less than $1,000 put away in a savings account! So, what can you do to start saving more? Keep reading for tips on how to grow your savings!
Make A Budget
You won’t be able to successfully save any money until you have worked out a realistic monthly budget and are sticking to it. A popular budget plan is the 50/30/20 rule in which you spend 50% of your income on your needs, 30% of your income on your wants, and 20% of your income goes towards savings. Once you have worked out your monthly budget, you will need to decide on a system to track your spending and saving habits to make sure you are actually sticking to your budget and that it is working effectively for you. There are many ways that you can track your spending and saving habits, whether you choose to use the old-fashioned pen and paper method or a modern app that helps you track your money, you should definitely be doing something to make sure you are on top of how your money is being used!
Pay Yourself First
This one may sound easy, but it can be difficult. We are tempted to pay our bills first, buy what we want next, and then put anything left over into savings. But the truth is if we are using this method for saving, we are always going to come up short on what our savings goal was. If you have worked out a realistic budget using the 50/30/20 rule, then paying yourself first should be simple as you can automate your savings. Set your account up to automatically transfer 20% of your income into your savings account each pay period and then forget the money is there. You won’t be tempted to spend money that you don’t see. If you use this method and treat your savings as if it is an expense that you have to pay just like any other monthly bill, you will be sure to grow your savings quickly.
Understand Needs vs. Wants
Sometimes it can be difficult for us to differentiate between a need and a want. Needs are things you must have in order to live – food, water, shelter, utilities, etc. Wants are things you would like to have, but don’t necessarily need to have. It can also be easy for us to get carried away with an actual need and turn it into a want – for example you need a house, but do you need one that is 2,000+ sq. feet? You need clothes, but do you need enough to fill an entire walk-in closet? Be mindful of where your money is going and realistic about your actual needs vs your desires, and it will be much easier to make sure you are saving enough of your money to reach your goals.
Have A Goal
Even if you have come up with the best budget and are paying yourself first, you are unlikely to stick with the plan, or to keep the money in your savings account without touching it, if you do not have a specific savings goal that you are saving for. Whether you want to save money to buy a home, a new car, pay down debts, travel, or for retirement, you need to have a specific goal that you are saving for and know how much you need to save to reach it. This will help keep you disciplined in your spending and saving habits and will make your money grow much quicker. When you are planning your savings goal, set mini-goals within your plan so you can treat yourself when you reach these mini-goals. Celebrating and treating yourself each time you reach a mini-goal along the way will help keep your savings plan exciting and will make it easier to stick to your plan.
Spend Less Or Earn More?
When it comes to saving money, there are two ways you can do it – spend less or earn more. Our previous tips are methods you can use to help you spend less and save more. But you can also consider options that will help you earn more, so you will have even more money to be able to put away into your savings.
The first option is to consider a side gig. It used to be that a side gig would require you to get a second part-time job and spend even more of your time away from home, but today there are so many ways to make money on the internet doing things you enjoy, making a side gig much easier for many people. If you don’t want to invest more of your time into making money with a side gig, then you can also consider finding ways to set yourself up with residual income. Residual income is income that requires you make an initial investment of time or work up front, but consistently pays you throughout the future, like investing in real estate. It is also important for you to know your worth and make sure you are earning it. Don’t be afraid to ask for a raise if you have truly earned it and deserve it.
No matter what options you use to help you save and grow your money, make sure that you are sticking to your plan and watch your money grow! If you are saving to buy a home, contact American Dream Home Mortgage today to discuss your options with a professional mortgage processor that can help you reach your goals!