With the uncertainties of life and an unstable economy globally, there is a need for increased and conscious savings. So If you are an entrepreneur, a student, or a worker, you have to take your savings a step further to make sure you don’t run into big money problems during minor financial emergencies. Follow these tips to get started on increasing your savings.
1. Set an emergency fund goal
The first thing to do when working on increasing your savings is to set a goal. If you just try to set a general goal to save more, you will likely fall short. Setting achievable and realistic goals makes the savings process much more likely to succeed. How much you should save depends on your recurring expenses and the likelihood of running into a costly emergency.
For most households, you should save at least three to six months of expenses in a cash emergency fund. Job losses and layoffs happen, as do injuries, illnesses car accidents, and home repairs. Start by saving enough for your insurance deductibles, and grow your emergency fund until you hit the three to six-month target. If you are self-employed, increase that savings goal to at least six to 12 months of expenses.
2. Make savings automatic
One of the hardest parts of saving is remembering to save. Take the “remembering” part out of the equation and you are much more likely to succeed in savings. Lucky for us, there are many ways to make your savings automatic with modern online banking and mobile banking tools. You likely already have automatic saving built into your bank account. You just have to log in and turn it on.
Log into your existing online banking account and navigate to the transfers section. There, you should see an option to transfer money from one account to another. Most banks give you an option to make a transfer recurring. The best option is to set your recurring transfers to take place on payday.
3. Split your direct deposit
If you work for a large employer and get paid via direct deposit, you may have an option to split your direct deposit into multiple deposits. At my last employer, for example, I could add up to three accounts for my direct deposit. I took advantage of this at my last three jobs to automatically maximize my Roth IRA contributions each year in addition to other automatic savings and investments. If you are not sure about this, contact your employer’s HR department or your manager to learn more.
4. Save cash windfalls
Work bonuses, tax refunds, and cash gifts are all money sources you regularly live without in your monthly budget. When you get a big cash infusion all at once, use that cash exclusively for savings (or debt payments, if you have any high-interest debt).
5. Use a savings app
Take advantage of the many new savings apps showing up on your phone’s app store. Save more to stabilize your financial life. Your personal finances are too important to ignore, and savings are a cornerstone to financial stability. Make it automatic so you never forget and you’ll be on track for financial stability for years to come.