Understanding the mindset and strategies that make you successful in the long term are important in helping you save for a large expense like a house, education, or retirement. Here are some ways to grow your savings over time.
1. Set a Goal
What are you saving for? How much money do you need? How do you want to spend your savings? Make a plan and set a goal.
2. Create a Budget
After you set a savings goal, split up your expenses into categories and set a budget for each one. Try to set each budget so that 50% of your income will go to necessities like your mortgage or rent, utilities, food, insurance, and transportation. At least 30% should go towards saving. Anything left over can be for entertainment purposes.
3. Build an Emergency Fund
Once you know your budget, you know what your monthly expenses are. Build a 6-month emergency fund in a high yield online savings account like Yotta Savings or Ally Bank. You can even go to Betterment or Wealthfront to create customized emergency fund goals with a Betterment Safety Net account or Cash Reserve account. You should never touch this 6-month emergency fund unless you have lost your source of income or need to pay for a medical emergency. The emergency fund should be your priority. Too many people prioritize saving for a vacation over an emergency.
4. Set it, but don’t Forget it
Starting with your 6-month emergency fund, set an automatic recurring weekly or bi-weekly deposit into your savings account. Once you reach the emergency fund goal of 6 months, you can put all of your savings into other accounts. Ally Bank and Betterment Cash Reserve allows you to split your savings into multiple buckets. You can categorize one bucket as “Emergency Fund”, another as “Car Fund”, and another as “Vacation Fund”. With every raise or bonus you get, you should increase your contributions to your savings account.
5. Track your Spending
You may be surprised that you spent nearly $70 on Starbucks each month or you may be shocked to learn your subscription and membership services end up being $2000 over a year. There are plenty of great personal finance and budgeting apps out there. The most popular ones include Mint, NerdWallet, and Personal Capital. I actually recommend using Goodbudget because it is more manual. It encourages you to save money because it forces you to track your transactions as you make them. With the automated apps, you don’t track your expenses until they are already expended.
6. Avoid Debt
Avoid buying a newer car. Avoid financing that new 80″ 8K TV. Pay your credit cards in full each month if you can. With debt, you pay interest. In my opinion, you should’t be saving anything if you have debt. Pay your debt first, then save.
You can even try minimizing your current debt by refinancing your mortgage or transferring your credit or loan balance to a 0% intro credit card.
7. Maintenance
Stay healthy, maintain your home, and maintain your car. This will help you avoid any unnecessary costs in healthcare, home repair, or a car mechanic.
8. Buy High Quality
Though expensive, high quality furniture or even a high quality car will last at least a decade longer than low quality alternatives. When the new MacBook came out in 2007, it was known to be a high quality product. Guess what? My 2007 MacBook still works today and feels as fresh and quick as a new computer. I know people who went through 6 laptops in the past decade alone.
9. Evaluate Tax-Advantaged Savings Accounts
For your health, you can open an HSA, or Health Savings Account. Your contributions are tax deductible. The growth is tax free if you withdraw the money to pay for qualified expenses. The same goes for a 529, an Education Savings Account. Consider your retirement and open a Traditional IRA where your contributions are tax deductible. Sign up with Betterment or Wealthfront through our links and receive $5000 free management for 1 year.
10. The 401k Match
Not all, but most employers offer a 401k match. My employer offers a competitive 6% match. Make sure you are contributing at least what your employer is matching. Finance gurus like Dave Ramsey would suggest you put at least 15% of your income towards retirement.
11. Consider Other Methods
If you have taken an economics class, you may have heard of CD’s, Bonds, Mutual Funds, or Stocks. You can invest your money into different assets to see returns on your investment over time. Try CashApp, Robinhood, Webull, or M1 Finance to start investing for free today. CashApp will give you $5 when you send or receive money. Robinhood will give you 1 free stock worth up to $500, Webull will give you 4 free stocks when you deposit $100 in their platform, and M1 Finance will give you $30 when you deposit $100 within 30 days.
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