All of us want to build up our savings. After all, having money set aside puts us in a better position to cover unexpected expenses, handle costly emergencies, and achieve our financial goals. But of course, the demands (and expenses) of day-to-day life can often make saving large sums of money a significant challenge.
By implementing a solid savings plan and employing a few clever ways to save money, though, anyone can accelerate his or her savings growth. To build up the amount of money you’re able to set aside, consider these six effective ways to save money each month:
- Track and analyze your spending — The first step to building up your savings is to plan out your savings strategy. And to do this effectively, you must develop an understanding of how much money you spend and what you spend it on. However you’d prefer to track your spending — whether it’s with a pen and paper, a spreadsheet, an app, or via another method — keep a record of all your expenses large and small for at least a month. And once you have this spending data collected, organize it into categories such as transportation, housing, groceries, entertainment, utilities, etc. Next, double-check your entries against your bank and/or credit card statements to make sure you didn’t overlook anything, and total each category amount to develop an awareness of exactly where your money is being spent each month.
- Build a budget … with a savings goal included — Now that you have a clear understanding of your monthly expenses and where your available funds are being spent, you’re in a good position to create a household budget — and to look for opportunities to build savings into it. Of course, many expenses in your budget won’t offer any flexibility, such as your housing, utilities, and any recurring debt or loan payments. But in other areas, such as entertainment, dining out, and other splurges, you can likely find opportunities to cut back on your spending and instead devote these funds to savings. After identifying these opportunities, create your budget with a built-in savings goal that feels attainable based on your expenses vs. your income, and then do your best to stick to the budget you’ve built. No amount is too small to start a savings habit. And over time, you can gradually increase the amount you save each month, ideally reaching 15% to 20% (or more) of your monthly income.
- Reduce your unnecessary spending — If you’re unable to save as much as you’d like, you may need to take a deeper dive into identifying any nonessential spending in your monthly budget. In addition to prime candidates such as entertainment and dining out, other areas where you may be able to trim your monthly expenses include:
- recurring charges, such as memberships and subscriptions — and especially those that might be seldom used or that may have auto-renewed without you realizing it
- splurges such as regular visits to the coffee shop or visits to the office snack machine, which can be replaced by brewing your own coffee and packing more budget-friendly snacks purchased at the grocery store
- cutting back on impulse buys, which can derail your financial goals — especially when they occur regularly
- eliminating unhealthy and costly habits such as drinking alcohol and smoking
- replacing expensive, long-distance travel plans with getaways that are closer to home and much less pricey. Or even opt for a “staycation” in your hometown that allows you to relax, see the area sights, and avoid the biggest travel expenses such as airfare, lodging, and car rental
- when tempted to make any large, non-vital purchase, hitting the pause button for a few days to consider whether the product or service is really necessary — or if it can be avoided, with the money instead devoted to savings
- Pay down your debts — If you’re carrying substantial debts — and especially high-interest debts such as credit card balances — the interest building on them could accrue more quickly than your savings can grow. Further, when left unpaid, such mounting debt can wreak havoc on your credit score (and do away with the many advantages that a good credit score can bring). Ultimately, the money you devote to paying down debts can lead to significant savings over the long haul. And once these debts have been eliminated, it will free up funds that can then be contributed to your savings.
- Open a dedicated savings account — For many of us, setting money aside in an account devoted strictly to savings — such as a personal savings account or money market account — can help reduce the temptation to borrow from or otherwise spend the accumulated funds. And for those looking for ways to make their savings balance increase even faster, higher-interest-earning options such as certificates of deposit can offer safe, guaranteed growth, all while putting the funds in a place where they can’t be withdrawn (without penalties) for a specified period of time, further reducing the likelihood of spending the money rather than saving it.
- Make savings automatic — For those who own both a checking account and a savings account, most banks offer the option for customers to set up automatic, recurring transfers from one account to the other. Customers can choose the amount to be transferred, the time intervals at which the transfers will occur, and where the money will come from and be moved to. And they can often do that via just a few clicks and/or swipes within their online or mobile banking account. By leveraging this option, you can make whatever amount you choose to move from checking to savings go there automatically each pay period, each month, or as frequently as you’d like. And it’s all achieved without you having to think about moving the money, typically resulting in a reduced temptation to spend the funds.
At The Southern Bank, we pride ourselves on offering friendly, personalized service to all of our customers — and that includes providing guidance when you have questions about any of our banking services. To learn more about our Personal Banking services ranging from Personal Checking and Personal Loans to Savings & Money Market, Certificates of Deposit (CDs), Mortgages, and more, check out the Personal Banking page on our website or visit one of our local branches for friendly, in-person service with a smile.