Saving money for the future is important. You want to create a financial reserve so you can weather economic downturns, periods of inflation, or a full-blown recession. However, many people struggle to save, especially with the cost of everyday items on the rise. The good news is that there are many things you can do to help save, even when money is tight.
Here are 5 tips to help you maximize your savings during tough financial times:
- Create Saving Goals
Think about why you want to save money. Your “why” can keep you motivated to continue saving despite changes to your income or financial obligations. At the top of your “why” list should be an emergency fund. Everyone should have a cushion to get them through an unplanned event. Ideally, you should aim to save at least three to six months of living expenses, and it’s a good idea to place these emergency savings in a dedicated account. This way, you’ll have money to cover expenses during a job layoff, medical emergency, or other unexpected financial crisis. Your other goals may include saving for retirement, saving for a home purchase or renovation, saving for college, or paying off credit card debt.
- Revisit Your Saving Habits
Consider your current savings strategy and make adjustments as needed based on your current financial situation. It’s okay to reduce the amount of money you save if you’re facing financial changes. In fact, your basic needs should always be met before you save. For example, you should never skip your mortgage or rent payment in order to save. But you can certainly cut back in other areas in order to free up some funds for saving. Maybe you can’t afford to save $500 a month right now, but you should aim to save at least something on a monthly basis. Because your financial situation is ever-changing, it’s a good rule of thumb to revisit your savings habits every few months. That way, you can increase or decrease your monthly savings as your budget allows.
- Supplement Your Income
If possible, aim to boost your income so you can deposit additional funds into your savings account. There are many ways to increase your income, including negotiating a raise, switching to a higher-paid job, or starting a side hustle. You can utilize your professional skills for freelance work, or you might consider babysitting, walking pets, tutoring, or selling things online.
- Cut Expenses
One easy way to free up some additional cash is to reduce the amount of money you spend. Budgeting can help you establish areas where you can cut back on spending. First, track all of your expenses to see where your money currently goes. Consider which of those expenses are needs versus wants, and review where you might be able to cut back. You’d be surprised at how many things you can do to potentially save some money.
Here are some areas to focus on:
• Housing – If you currently rent, offer to make repairs in exchange for a rent reduction, consider getting a roommate to help split the cost, or find a cheaper apartment. If you own your home, you might consider renting out a portion of it, refinancing your mortgage, or asking your lender to remove private mortgage insurance if you now have at least 20% equity in your home.
• Utilities - Electric prices in the U.S. increased by 8% in 2022, and other utility costs are expected to rise as well. Luckily, there are ways to reduce your utility bills and conserve resources. Start with a home energy assessmentand discover which home improvements could help lower your monthly energy bills. You can also help cut down on utility costs by adjusting your thermostat when you’re out of the house, unplugging unused appliances, and installing energy-efficient appliances. You can also refrain from running the dishwasher or laundry machine until it’s full, replace inefficient light bulbs, and shop around for cheaper utility providers.
• Insurance – Review your homeowners insurance, car insurance, health insurance and life insurance policies to see if there are any changes that could potentially save you money. Consider raising your deductible, cutting non-essential coverage, and shopping for cheaper policies. Also, ask about available discounts or rebates for home security systems, defensive driving classes, fitness classes, and more. You’d be surprised how many things can help save you money on insurance policies.
• Food - Tweak your meals and food purchases. Instead of eating out, cook at home. When shopping for ingredients, use a list, compare prices, and purchase store-brand rather than name-brand items. You can also freeze leftovers to enjoy on busy evenings.
• Debt – While it’s essential to continue meeting all of your debt repayment obligations, you might consider consolidating multiple debts in order to reduce your monthly payments, and help you get out of debt faster. You may also want to freeze your credit card use until you establish adequate savings. Putting more money on credit cards will only result in a higher monthly minimum payment.
• Subscriptions – Make a list of all of your subscription-based services and cancel any non-essential, unwanted, or unused ones. You may be surprised at how many different services you’re currently subscribing to. Between cloud storage, music and video streaming, meal kits, eBooks and audio books, dating sites and fitness apps, cutting back on your subscriptions could save you some serious money.
- Get a Better Savings Account
Typical savings accounts earn pennies a month. Instead, move your money to a high-interest savings account, and let your money work for you. Many online banks, like Bank5 Connect, offer high-yield accounts with interest rates well above the national average. A higher-interest savings account will help you grow your money faster over time. Just be sure to review all of the fine print before deciding on a new account. You’ll want to consider the minimum deposit, minimum balance needed to earn interest, and whether you’ll be assessed any monthly maintenance fees.
Saving money is possible even if you’re on a tight budget. In addition to implementing these strategies, remember that small deposits add up and can make a big impact over time.