Many Americans want to become better savers. Key findings in a GOBankingRates survey on money expertise reveal that 29% of 1,001 surveyed Americans are interested in learning how they can better save their money.
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Halfway through the year, it is possible to adopt better saving habits and save at least $5,000 before 2022 ends. However, establishing better saving practices often means going beyond cutting the cord on a handful of subscriptions and eating in with the help of meal planning. Follow these tips for saving an additional $5,000 this year and shifting your financial habits to incorporate better saving strategies.
How Saving $5K Breaks Down Month Over Month
How much, on average, would you need to save each month to hit your $5,000 goal by the end of the year? Hong Bloom, head of customer engagement and experience at TD, said saving $5,000 over a year means putting $416.67 a month into savings on average. Those getting started a little later into the year, such as mid-year, will need to add a bit more into savings in order to hit their goal. Let’s look at how you can get there.
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Split Your Tax Refund 40/40/20
If you haven’t already spent your tax refund, this will play a key role in helping build up an additional $5,000 in savings.
Beth Logan, enrolled agent at Kozlog Enterprises, has eight years of experience as a tax professional. Logan recommends clients take their tax refund and split it 40/40/20. Put 40% of that refund toward paying down debt or bills. Then, put another 40% into savings. Use the remaining 20% for fun.
Split Your Direct Deposit
If you receive a direct deposit from your employer, Logan recommends splitting that deposit into two payments.
“The simple way to do this is to just take an amount — let’s say $50 or $100 per paycheck — and have it deposited into a savings account. Then the rest goes into a checking account,” Logan said.
Put the amount you need to pay bills into your checking account and add the rest into savings. In order to do this well, Logan said savers should total their rent or mortgage, insurance, utilities and any other bills and determine what is needed.
Increase Raise Savings
If you receive a raise, the general finance guideline is to avoid letting these additional earnings cause lifestyle creep. Logan recommends increasing the amount that goes into savings by half of the additional net amount in the paycheck.
“If the pay raise results in $80 more of take home pay, for example, then increase the amount deposited into savings by $40,” Logan said.
Bring In an Extra Income
Six months into the year, those who want to become better savers can reach their goals by minimizing expenses or increasing their income. Individuals might use their mid-year review to position themselves for a potential raise or merit increase. If you only receive a review once a year or there isn’t a raise available in the company budget, consider taking on a side hustle.
Amy Maliga, financial educator at Take Charge America, said your hustle can be a part-time job or flexible gig work. There are several side hustles you can work year-round or that are summer-specific, like doing freelance catering work on the weekends or renting out recreational equipment, like boats or kayaks you don’t use, on rental marketplaces that can help you earn extra passive income.
Those who genuinely don’t have time to go out and do ride-share driving or freelance writing work may decide to meet their $5,000 goal by selling some of their belongings. Maliga said you can sort through your closets, attic and garage and look for items you can sell, such as gently used sports equipment, small appliances, jewelry, clothing and any other accessories you no longer wear. Even used media and game cartridges can bring in some extra cash.
If the thought of spending your spare time working, especially during the summer months, seems overwhelming, Maliga said to remember it’s only temporary.
“Put all the extra money you make toward your savings goal, and you’ll be amazed how quickly the balance grows,” Maliga said.
Track Your Monthly Cash Flow
Once you have a target set, like $5,000 for the year, you can reach this goal by tracking your monthly cash flow. Each month, look at your balance in your savings bucket to see if you are on track.
With so many aspects out of our control in the current economic climate, it’s critical to get organized and use the right tools to manage your spending and saving habits. Bloom said you can track spending by downloading the app for your financial institution or using Excel or another free spreadsheet tool to set up budgets and track bills.
It may also be helpful to get a calendar to act as a physical reminder to help you become a better saver.
“Use your online banking or receipts to tally your expenses daily, weekly and monthly,” Bloom said. “Then write the totals on the calendar. You’ll begin to see patterns in your spending, which will help you budget and save.”
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