6 personal finance tips to bank more savings
Putting money in savings may seem impossibile for the cash strapped, and others may view it as an afterthought. Still, even if you start small, experts advise setting personal finance goals to build that cash cushion through savings.
“The fact is unpaid expenses are inevitable … and nothing helps you sleep better at night than knowing you have some money put away for a rainy day,” says Greg McBride, a senior vice president and chief financial analyst at Bankrate.com.
Whether you have $0 balance or three-month’s worth of expenses saved and hope to make it six, financial experts say these tips can help build your rainy day fund:
1. Save first, spend second
While it might seem like a good idea to cut checks for bills, make that impulse purchase and then save, financial experts say a buy-first model often leaves nothing left to save. Instead, opt for automatic withdrawal from your check that puts money into a dedicated savings account each pay period.
2. Shop for a high yield savings account
Low interest rates for savings accounts provide consumers with little additional incentive to sock money away. Shop online for saving accounts at banks and credit unions to potentially increase your interest rates by 10 times or more. Rates still won’t likely exceed .5 to 1 percent — well behind inflation — but experts say it’s better than risking short-term reserves on higher risk options, like the stock market.
3. Keep your accounts separate
Chris Long, a certified financial planner and owner of highly rated Long Financial Planning in Chicago, advises using a different bank for a dedicated savings account, from the one where you do your other banking. “So when you’re looking at bills, and the checking account you don’t see the money,” he says. Though you want access to savings, avoid withdrawing regularly for minor “emergencies.” Depending on your financial picture, you may be able to pay for an appliance repair through your checking account and tighten your spending in other areas. If you need to replace your furnace, you then might consider dipping into your savings if necessary.
4. Set your goals
Yes, it’s like eating your vegetables, exercising, doing the right thing — easier said than done. Financial experts say to build your savings goals squarely around what you want and need to stay disciplined. “You have to find whatever motivates you and keep that [savings] habit,” McBride says. For some it’s saving to buy your dream house, while for others it’s just simple peace of mind if you lose a job.
MORE: No emergency savings? Why you should start putting money away now
5. Figure up your savings
Use a savings calculator to guide your math, entering everything from monthly living expenses to what you’ve saved. Tie it all back to your goals to make it meaningful.
6. Make targeted cuts to monthly expenses
To stay in the black, you may need to take on additional work, but you can often start saving by making cuts to your spending first. Review the cable bill — gasp, do you even need cable? — shop around for new homeowner’s insurance and think twice about that membership you never use. Carefully re-evaluate automatically debited expenses you rarely think about, and determine whether you can reduce or cut them. Then take the same eagle eye to one-time purchases.