If you are in the 50% of Americans who would not have $400 to cover an emergency expense, saving might be on your mind. To kick off America Saves Week 2017, here are my strategies for growing a savings account automatically. These strategies are meant to build short term and long term savings.
When my paycheck deposits, I hate nothing more than watching the money slowly disappear as bills clear. This always made it really difficult to designate money for savings. Once the money hit checking, I didn’t have the will power to transfer it and see my checking account get closer to zero once more. To combat this issue, I decided some money should never see my checking account. I decided it was time to put 10% of my salary straight into savings. I don’t think about it and my savings automatically climbs in ways I’ve never before seen!
If you don’t mind seeing the numbers drop, but still want automatic savings, many banks have an auto-withdrawal feature which will consistently move money from checking to savings. This option gives you more control as it’s easy to adjust contributions or to turn off.
Budget Too Much
With money automatically hitting my savings account, I looked for other ways to automatically build my savings. This started with a highly detailed budget. After I determined the immovable portions of my budget (student loan, mortgage, credit card, etc.), I found the most flexible item in my budget: groceries. The amount changes from week to week, and I saw an opportunity.
After determining the highest grocery bill we could afford, my husband and I dedicated ourselves to getting the most out of our grocery bill. We saw items going to waste and decided to carefully strategize meal plans to get several meals out of a few items. When I head to the grocery store, I have my predetermined budget. Whatever the bill is, I add the difference and withdraw the leftovers in cash.
For example, if my bill is $80.00 and my budget was $100.00, I use my debit card to withdraw $20.00 right then and there. That cash goes straight to envelop savings and I don’t miss it at all.
My father is a CPA. Sometimes he feels his wise financial advice goes unappreciated, but he refuses to let me ignore him when it comes to my 401(k). I have had the words “FREE MONEY” drilled into my brain. Don’t tell him I said this, but he’s right. If you’re eligible for a 401(k), maximize what your company will match with regards to what you can afford. All this cash costs is a review of your benefits, a little math, and a budget review.
Here’s an example: Company A matches 50% of contributions up to the first 4% of an employee’s salary. If the employee earns $50,000 annually, 4% of their salary is $2,000. If $2,000 is contributed by the employee, the total in the 401(k) would be $3,000.
Above all, remember that your savings does not need to start with hundreds of dollars. Start with whatever you can afford and let automatic savings grow your account.
Author Tracie Fauth is a Marketing Specialist with LSS Financial Counseling.