The Savings Challenge

Saving money is hard. Here are 10 strategies for building your savings.

By Sheryl Nance-Nash

Few would argue about the need to save, be it for emergencies, retirement, a house, your child’s college education, or a bucket list vacation. But knowing and doing are two different things. The choice is yours to make every day—save or spend?

Mostly people say yes to spending. A recent survey found that 66 million Americans have no emergency savings. The stats are just as gloomy when it comes to long-term savings. According to a survey from GOBanking, one in three Americans has nothing saved for retirement, and 56 percent have less than $10,000 saved.

The $64 million question: How do you boost your savings? The answer: You need a strategy.

1 Track expenses and free up cash
“If you don’t know how much you spend each month on the necessities, you can’t plan accordingly,” says Andrea Woroch, a consumer saving expert. “Track your spending for one to three months [use an app like Mint for help] to determine how much money goes toward essentials like mortgage or rent, insurance, food, transportation, and utilities.”

You’ll also be able to see where money is being spent on nonessentials, such as dinners out, concerts, and elsewhere. You can cut out, or reduce, spending in those areas and save that money instead. Look for ways to slash even everyday expenses. “Carpool or take public transportation to cut down on fuel costs,” Woroch suggests. “Prep meals on weekends and freeze them so you don’t order takeout during the week. Budget hack—reduce your fixed expenses by calling providers and requesting discounts or reduced payments on things like car insurance, mobile plans, and cable TV.”

2 Set goals

It will be easier to stay motivated if you are clear about what you’re saving for. Be specific. You want to save a certain amount for a particular reason by a certain date. For example, you want to build an emergency fund of at least three to six months of living expenses within two years, or whatever goal you set.

3 Start small
Saving doesn’t have to be daunting. “Take baby steps—a little can go a long way over time,” says Thuong Thien, a senior financial advisor with Hewins Financial. “If you can set aside even 5 to 10 percent of each paycheck, you are not likely to notice a difference in your take-home pay, but you will have that cushion when an unexpected cost comes along.” Increase the amount when you can. What’s important is to get in the habit of saving.

4 Treat your emergency fund as a bill
When you’re saving for an emergency fund, the goal may be hard to stick to without looming due dates, interest rates, or late fees forcing you to pay up. Since there’s no immediate or obvious repercussion for missing your savings goal each month, it’s important to treat it like a bill, says Woroch.

5 Fight temptation

Automate your saving. Check with HR about splitting your direct deposit to divert a portion directly into your savings account. Alternatively, set up a recurring transaction to move a set amount from your checking account to your savings account at the same time you get paid. Because it’s happening automatically, you never really “see” the money—it’s like saving money you didn’t know you had, compared to looking at your account balance and making a conscious decision to move money into savings, points out Kerri Moriarty, head of company development for Cinch Financial.

It won’t hurt either to set up a savings account at a different bank than your checking account. “Since there are two banks, you won’t see your savings account balance when you check your checking account balance, making it less tempting to pull from savings into checking—which is harder to avoid when both accounts are conveniently in the same place,” she says.

6 Avoid lifestyle creep
If you get a bonus or raise, ignore the impulse to reward yourself with a buying spree or upgrade to a more expensive apartment or car. If you do that, you lose out on an opportunity to save money that you won’t even miss. Similarly, try not to view loans or debt as temporary expenses. “If you’re used to living without the money that you put toward debt, and don’t view it as a temporary expense, it will be easy to transition over to saving that money once you’ve paid off your debt,” says Rianka Dorsainvil, president of Your Greatest Contribution, a financial planning firm.

7 Chip away at debt

For sure, many people are saddled with debt, and for them saving seems impossible. Come up with a plan to get that debt under control. Tackle the card with the highest interest rate first. Pay as much as you can, but not at the expense of other bills. Next, concentrate on the card with the second-highest rate and so on, until your debt disappears. Be fastidious about paying your bills on time. Late fees are a huge waste of money and really add up over time, not to mention the negative impact on your credit score.
For many people, the inability to systematically pay down debt is more a psychological issue than a financial one. Those who tend to max out their credit cards are at high risk to do the same once debts are repaid. It takes a shift in how you view debt to break the cycle of poor spending habits.

“You’ll hear many success stories from individuals paying off large amounts of debt, often using different strategies,” says Thomas Walsh, certified financial planner, client service and portfolio manager, Palisades Hudson Financial Group. “It is important you look within and face your debt fears so you can begin to understand what caused you to fall behind and what will get you back on track. What may seem like the most effective strategy on paper may be unsuccessful in practice if psychological limitations keep you from sticking with a plan. Find the strategy that you can live with both financially and psychologically, then stick to it.”

8 Look for creative ways to save
Set up a side gig and direct all earnings to savings. Tutor or do yard work. “Uber isn’t the only side hustle out there,” says Moriarty. “If you earn money for anything, like consigning clothes on Poshmark or Tradesy or running an Etsy shop, direct all the money you earn directly into your savings account.”

Redeem credit card rewards. Check your credit card statement to see how many reward points you have. Then visit the rewards website to find out if you can convert the rewards into cash or gift cards. “Some credit cards even double the value of rewards at specific retailers,” says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network.

Don’t stop to applaud yourself for being a pro at coupon clipping. Go one step further: take the savings and add them to your stash. By all means, don’t spend the savings on something frivolous.

9 Spend with cash to save cash

Cash is still king. Use it. Research shows that people who do not use debit or credit cards are less likely to throw that extra item into the shopping cart or make an extra purchase and typically spend 15 to 20 percent less than when using a credit or debit card.

10 Qualify for your company 401(k) match

If your company offers a 401(k) with a match, do your best to contribute the maximum amount the company will match. Consider it free money and an easy way to increase the amount you put away for retirement each year. “If your company matches up to 5 percent, try to contribute 5 percent from each paycheck,” advises Moriarty. “If it matches up to $3,000, try to contribute the full $3,000. Anything less leaves that money on the table—and you lose the time that lump sum amount has to grow!”

Remember, sacrifices today will yield rewards tomorrow. Says Gallegos, “The whole idea of budgeting, saving, and managing your money is to be able to achieve your life goals. Saving allows you to have the option to pursue more of what you want, when you want.” DW

Sheryl Nance-Nash is a freelance writer specializing in personal finance, small business, and general business.

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