Think you’re the only one who’s having trouble setting money aside and building your savings? It turns out you’re not alone. According to a 2017 survey from Bankrate.com, nearly 60 percent of Americans don’t have enough money saved to cover a $1,000 unplanned expense.
Saving more money should be a priority for nearly everyone. It’ll help you from running up loads of debt if the unexpected happens, like costly repairs to your house, your car, or—even worse—should you lose your job.
The hard part can be finding the right balance between paying the bills and growing savings. Not sure where to begin? Try these three simple steps.
Step 1: Draft Your Budget
Your first step is to draft a budget. You can’t start saving if you don’t know exactly how much money you have coming in and going out each month.
Here’s a simple way to draft a budget: At the beginning of every month, estimate the amount of money that will flow into your household. Then subtract your monthly expenses from this figure. Don't forget to be realistic. Budget enough for groceries, dining out, or going to the movies. If you create an unrealistic budget, you'll have little chance of following it.
At the same time, you need to get a grasp on your spending habits to make sure you’re spending less than you earn each month. That could mean taking a hard look at your budget and cutting back on things that shouldn’t be a priority over saving money.
Once you know the difference between your income and your expenses, you'll know how much money is left for saving.
Step 2: Force Yourself to Save
It’s easy to get discouraged when you see the results of your budget, especially if you only have a small amount of money left over once you calculate your expenses. Here's a simple truth, though: what's important is that you start saving something, not how much you are actually saving.
So, if you only have $50 to move to savings at the end of the month, do it! A little bit of money saved is better than nothing at all.
Another way to save automatically: take advantage of your employer’s direct deposit. If your company offers it, you could ask to have some of your paycheck deposited into your checking account and some of it into your savings account. This will help your savings account grow without you having to think much about it. Just make sure the amount you are automatically depositing into savings works within your budget.
Step 3: Pick the Right Savings Account
It’s important to select the right savings account. For starters, it’s a smart move to choose an account that pays interest. Thanks to compounding, depositing money into an interest-bearing savings account will help it grow faster. And if you’re making regular deposits, it’ll grow steadily, too.
Secondly, be wary of accounts that require high minimum balances. If you don’t have a lot to invest at the outset, make sure that you won’t be hit with fees for not having enough money in your savings account.
Managing money is important for everyone. Set a budget, track your spending and monitor all your finances from one place with Liberty Bank’s Money Manager.