Trying to save for your future is like trying to lose or maintain a healthy weight. You always start with good intentions. But it’s hard to have the discipline to keep on a diet, or follow good savings habits, when fattening foods call out to you—or when that fancy car, home, or high-end restaurant that you may not really be able to afford offers such a tempting alternative for your money over a savings account.
Despite all that, most of us never give up striving for health and fitness. It’s never too late to start being a smart saver. So here are some approaches that could help make a better saver out of even the chronically savings-challenged!
1. Tracking Your Expenses
The first step in figuring out how much you could be saving usually is to understand how much, and on what, you’re spending your money. You can start by reviewing account statements from your checking account and credit cards and categorizing expenses into key groups such as rent, utilities, debt payments, food, entertainment, clothes, subscription services, etc. It is often useful to look at the variable expenses like clothing and food to find out where there may be room to cut.
If you’re willing to log your expenses and put in the effort to track them in real time, there are apps like Mint and You Need a Budget that can help.1
2. Make A New Plan, Stan
Now that you feel a bit more in control of your life by understanding your expenses, you could make a savings plan. Those with a savings plan are twice as likely to save successfully.2
There are lots of ways to create a savings plan. But for the savings challenged, you might need some help. The Consumer Federation of America is offering assistance by asking you to take the America Saves Pledge. They’ll help you set a goal, create a plan, and keep you motivated with advice, tips, and reminders.3
3. Autopilot: Set a Regular Transfer To High Yield Savings Account
A great way to save is not to make regular savings decisions at all. The secret here is to use the plan in step two to figure out what portion of your regular paycheck you need to put into a checking account to pay bills and other expenses, and what percentage you can comfortably put aside for savings.
Then, you may be able to have your employer divide your paycheck into separate percentages to go into your checking and savings accounts.4 Your employer may have a form to do this. If not, it can’t hurt to ask. Using automated transfers to generate regularly recurring savings deposits reverses the burden of action—you have to act only if you prefer to save for a given period.
4. Choose Your Savings Account Wisely
If you're keeping all your money in a checking account and earning no interest or a paltry percent, you could be missing out on opportunity to earn more interest and save more. In fact, the average checking account delivers rates significantly lower than what's typically offered by high-yield savings accounts (HYSAs). More specifically, interest bearing checking account rates have remained under 0.1 percent for more than five years.5 HYSA rates, on the other hand, often exceed rates of 1 percent. Both numbers may look small, but over time, even a HYSA rate of 0.6 percent will yield more interest than a checking account rate of 0.04 percent.
If you’re willing to tie up your funds for a longer period, say a year or two, you could also earn more in a Certificate of Deposit (CD) – another savings option that tends to have higher returns than a traditional checking account. (What is a Certificate of Deposit? CD Basics)
5. Take a Nip Out of Your Credit Card Debt
Start with a small goal of reducing your credit card debt by $1,000. A $1,000 debt reduction could save you $150-200 a year in interest, or more. A credit card interest calculator can help you understand projected savings based on your current balance.6
6. Reduce Interest
Reducing the interest you pay on credit cards or other debt is one of best ways to save money. You can create a plan to pay off your debt. Try calling your credit card company to see if they’ll give you a lower interest rate to keep your business. Or transfer funds to an interest-free credit card to save while paying off your debt.7
7. Pay With Cash or Check
Forcing yourself to pay for everyday expenses in cash or by check could slow down the impulse to spend and get you to think twice about what you really need instead of what might be nice. Research shows that people spend more when using a credit card because it is “less painful” than pulling out cash to pay or taking the time to write a check.8
8. Look Into Online Savings Accounts
In looking for the best place to keep that hard-earned money you’re saving, check out online savings accounts vs. those offered by brick-and-mortar banks. High-yield online savings accounts generally offer a better interest rate than traditional brick-and-mortar banks. Make sure to check for the fees that an account charges so that you know exactly what each account may cost to open and maintain.
9. Trim Your Subscriptions
Do you really need subscriptions to all of those premium cable channels AND three or four online streaming services? Did you remember to cancel your old music subscription service when you switched to your new one? What about all those other “free” offers that you started to pay for after the introductory phase ended? Paying an extra $50 or $100 a month on services you don’t really use can really add up.
10. Set Aside Time To Save
Finally, whether it’s implementing these savings ideas or others from articles around the web, try spending just one hour a month to put these changes into action. You may be able to see results sooner and feel better about your ability to save and get more control over your expenses—and your life.