5 tips for building up your savings
By Jenna Boerger
NFCC Certified Financial Professional
Americans are finding more satisfaction from saving money than spending money, according to The Gallup Economy and Personal Finance poll. Their results indicated that, on average, Americans prefer to save (62 percent) versus spend (34 percent).
However, the poll also found that people are not acting on this desire. So the looming question is: How can we become savers? Here are some tips.
- Have a budget and stick to it. While most of us hate the idea of a budget, it is an important part of the saving process. For example, if your expenses are equal to, or exceed, your income, savings will require additional effort and other issues will need to be addressed. Having a budget will help you determine how much you have available for savings.
- Review your budget for discretionary expenses you could reduce. Review your spending habits to find problem areas. Once you’ve identified where you are spending your discretionary income, evaluate its impact on your budget, and, ask yourself if you’d be willing to eliminate some of these items from your budget to free up more income for saving.
- Set Goals. Without a specific goal in mind, saving becomes more burdensome. For example, if you are saving for something specific, such as a down-payment on a home, new vehicle, family vacation, you will likely be more successful because you have a tangible goal. If you want to boost your general or ‘emergency’ savings, you can still set a goal. Maybe it is to save 3 months of your income, or maybe it is a specific dollar amount you’d like to save. Having a specific goal gives you something to work toward, rather than the ambiguous, “It would be nice to have some savings.”
- Separate your savings from your spending money. Whether you keep your funds in a bank or operate on a cash basis, co-mingling your savings and spending money can be too much of a temptation to spend. Separating your savings and spending money makes you less likely to dip into your savings. You will also typically find satisfaction in hitting certain milestones in savings. So even if you occasionally pull funds out of savings, you won’t want it to dip below that milestone. If you mix everything together, those milestones are not as obvious.
- Save first, not last. It is common for people to save whatever is left at the end of the month or pay period. But operating in this fashion results in significantly less savings, if any. If you feel like you have more funds available (because it shows in your checking account balance) you may be more tempted to make impulse purchases and less likely to comparison shop. When you remove the amount you’d like to save at the beginning, you begin to live on less. We’ve all had those months where something unexpected happens, such as car repairs or unexpected medical expenses, and we find a way to trudge through the month and make ends meet. Saving first operates under this same principle. Once you’ve proven to yourself you can make it through the month with less money in your budget, by taking the savings out first, you will find you can still get by.
No one ‘accidentally’ saves money. It is a conscious effort. By implementing some saving strategies intentionally, you will see your savings grow. Typically starting is the hardest part. Once you experience the satisfaction of a growing savings account, continuing to save will become easier.
About the author
Jenna Boerger is a certified financial professional at The Village Financial Resource Center. For more information about FRC, visit helpwithmoney.org or call (800) 450-4019.