The pandemic taught many people the value of saving for the unexpected. However, you require cash put aside for more than emergencies. You need it to fulfill your dreams.
You might protest, “But wages have stagnated, and COVID-19 is causing further setbacks.” This argument is valid, but you might nevertheless be overlooking valuable ways to make your money work for you. The following eight tips will get you on the path to saving toward your future goals.
1. Examine Your Budget
If you haven’t done so already, sit down and take a hard look at your spending habits. Many financial institutions break down your monthly bank statements into categories. Which of yours takes the most of your income, and where can you cut back?
You don’t have to look at budgeting as a chore. Make saving money less painful by implementing no-spend days and turning the process into a game. Every time you find a spare $1 in your wallet, add it to a piggy bank. Invent a contest with friends and family to see who can hit a money goal first.
2. Build Your Emergency Fund
Most experts recommend keeping three to four months of living expenses saved in a liquid fund. However, if you work in a specialized profession, you may want to lay aside more. It can take considerably longer than 120 days to find work that pays equivalent salary and benefits.
However, don’t throw up your hands if saving that amount seems impossible. Even if you only set $5 a week aside, you’ll have several hundred dollars in a few short months. That money can compound interest or come in handy. You won’t have to take out as much on credit for unexpected car repairs.
3. Take Advantage of Employer Plans
Does your employer offer a retirement plan? Changes in the tax code allow you to set more aside for your golden years, so take advantage. Your contributions accumulate on a pre-tax basis, saving you money temporarily when Uncle Sam asks for his due in April.
If your employer matches your contributions, try to maximize this amount if possible. It’s understandable if you need nearly all of your paycheck to cover monthly bills. However, remain aware you’re shorting yourself future income by leaving this money on the table.
4. Start an Independent Account
What if you are one of the millions of independent contractors in America? While you may not have access to employee benefits, you can start a retirement savings account. You can save a considerable amount on your taxes with the self-employed retirement plan deduction. Talk to your financial or tax advisor about how to maximize your savings.
5. Make It Tough to Touch Your Savings
Today’s online banking makes it a snap to link accounts and transfer between them. The downside to this convenience is that you can find yourself robbing from Peter to pay Paul. If you see a sale on a to-die-for designer bag, you might mentally justify transferring money from your savings to checking to cover the splurge. However, if you continually dip in to score deals, you’ll find yourself with nothing in the kitty when you blow a tire.
Keep your savings — at least the emergency fund portion of it — at a separate institution in an unlinked account. For the maximum inconvenience, decline the debit card and online access to these funds. If you have to drive to a branch to withdraw money physically, you are less likely to spend it on unnecessary purchases.
6. Get Over Your Fear of Investing
When it comes to long-term savings, the stock market tends to outperform cash contributions to various savings vehicles. While stories exist of people losing considerable sums in the market, if you take a sensible approach, you can make your money work for you. Investing in individual stocks sometimes seems impractical due to time constraints for performing market research. Consider opting for a mutual fund that distributes your investments for you.
7. Take on a Side Hustle
If you have walked on this planet for enough years, you probably noticed that jobs don’t pay what they used to, at least in the U.S. If you don’t earn enough from your nine to five, you might rely on high-interest credit cards to cover emergencies. Instead, consider taking on a side hustle to increase your income enough so you can set some aside.
8. Create Residual Income Streams
Time is money — no matter how rich you are, you can’t buy more hours in a day. One of the least time-consuming ways to pad your bottom line is through creating a residual income stream. Evaluate your assets. Do you have an RV that you can rent on Airbnb to bring in extra income with a nominal effort? If you got into gardening during the pandemic, can you peddle your excess broccoli to a local farmers market?
Save for Your Dreams Nearly Effortlessly With These Tips
In a tight economy, it’s challenging to save for your dreams. The eight tips above can help you put aside enough for that European vacation or first home purchase.