In today’s economy, it’s very easy to watch your savings go below $10K.
Inflation, racking up credit card debt, and impulse buys can all lead to spending beyond our budget. But the right strategies can help you get back to reach that threshold again or get to an even better place.
According to experts, assessing where you might be able to make room in your budget to contribute more to your savings is key.
“When your savings account balance takes a dip below that $10,000 mark, it’s time to roll up your financial sleeves and take charge,” said Zach Larsen, CEO of Pineapple Money. “Start by doing a deep dive into your financial situation.”
Taking action by boosting your monthly contributions is the surest way to close your savings gap. Here are nine things to do when your savings drops below $10,000.
Identify the Reason for the Drop
It’s crucial to understand the underlying reasons for the decline in your savings.
“First things first, reflect on why the dip happened. Did an unexpected expense pop up? Or perhaps it’s the result of poor financial habits? Be brutally honest with yourself,” said Jake Claver, finance expert and Qualified Family Office Professional (QFOP) at Digital Ascension Group.
He recommends taking a magnifying glass to your monthly expenses. “Is that daily coffee or monthly subscription really necessary? Trim the fat, and remember, a dollar saved is a dollar earned.”
Immediately Cut Back on Unnecessary Expenses
After identifying the cause of the dip in balance, you should look at any unnecessary expenses you can curb. This might mean cutting back on dining out, canceling subscriptions or memberships and seeking more budget-friendly options for necessary items.
“It’s essential to take proactive steps to regain financial stability,” Jeff Mains said, a finance expert and the CEO of Champion Leadership Group. “First, evaluate your spending habits. Identify non-essential expenses that can be cut back temporarily to redirect funds into your savings.”
He notes that this disciplined approach can help prevent your funds from further depleting.
Create and Stick to a Budget
According to Alec Kellzi, CPA at IRS Extension Online, developing an emergency budget that focuses on essential expenses and temporarily reduces non-essential spending can help you weather financial challenges while you work on rebuilding savings.
You can begin by calculating your monthly income and necessary expenses, and then setting aside a certain amount of savings every month. By sticking to this budget, you ensure that your savings account balance doesn’t drop below $10k again.
Automate Your Savings
If you’re not in the habit of regularly allocating a regular amount of your income after getting paid, Kellzi recommends establishing an automatic transfer from your checking account to your savings account each month.
“This pay yourself first approach ensures consistent savings, even when faced with fluctuating income,” said Kellzi.
Automating deposits on payday ensures you can more easily reach your savings goals and that your hard-earned money stays where it belongs.
Look Into High-Yield Savings Accounts
“When folks see their savings dip below ten grand, they often think about making more money and parking their cash in a high-yield savings account,” said Rob Whaley, finance specialist at Horizon Finance Group.
He says this approach will give you more bang for your buck. Moving your money into a high-yield savings account, which offers higher interest rates than traditional savings accounts, can help you build up your balance faster.
The goal, Whaley adds, is to build up your financial safety net and ensure your savings keep growing so you can feel more secure and ready for whatever’s down the road.
Consider Ways To Increase Your Income
Whether you seek a part-time job, freelance work, or look into monetizing a hobby, experts agree that diversifying your income sources can provide a valuable safety net. By supplementing your primary income, you can rebuild your savings faster.
“You’ve likely heard this a million times, but it bears repeating: don’t put all your eggs in one basket,” Claver urged. “Seek out secondary income sources, be it a side gig, freelance opportunities, or even passive income from investments. If one stream dries up, another can take its place.”
Evaluate Investment Options
Experts recommend exploring opportunities for investing any surplus funds. For example, you might consider options like putting money towards a brokerage account, retirement accounts or real estate investments to grow your wealth over time.
“Your goal is to make your money work for you,” said Larsen. “Look into low-risk options like bonds or even a diverse mix of stocks. These have the potential to offer better returns than your regular savings account.”
Rebuild Your Emergency Fund
Put simply: your emergency savings is your financial safety net and needs to be your top priority. Having this fund protects you from expensive car repairs, a broken fridge, or healthcare costs you didn’t see coming.
“Allocate a slice of your income to gradually build this fund,” Larson advised. “The rule of thumb is to have three to six months’ worth of living expenses saved up. It’s your cushion for those unexpected life curveballs.”
Re-Evaluate Your Financial Goals
Goals give direction to our actions. If your savings account balance has dropped below $10k, it’s a good time to reevaluate your financial goals.
Maybe you need to adjust your timeline or make some changes. This will help you stay on track and motivated to keep growing these funds.
“If your savings are dwindling, perhaps it’s time to set clearer, more achievable milestones,” said Claver.
Be it buying a home, saving for retirement or establishing a rainy-day fund, you should always have a specific figure in mind because “it’ll motivate you to save and spend wisely.”
Seeing your savings drop can be a wake-up call, Claver adds. “But with a mix of introspection, diversification and goal-setting, you can bounce back stronger,” he said. “Remember, it’s not about how much money you make, but how wisely you use it.”
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