The unpredictability of the pandemic and subsequent job and health care factors left many people scrambling to cushion or start an emergency fund in 2020. In April the same year, Americans’ personal savings rate – which is the percent of your disposable income you save rather than spend – skyrocketed to 33.8%, compared to 7.8% in January.1 Today, savings rates have returned to pre-pandemic levels. If you’re still dealing with a thin financial cushion, you can pull yourself back from the edge in terms of having little to no retirement savings or emergency money to fall back on. Below are some handy tips to help you maximize your savings.
5 foolproof ways to increase your savings rate
1. Identify where your money is going
Your ability to save money will largely depend on your financial self-awareness. If you're not keeping track of where your money is going each month, you won't be able to identify where your spending might be out of control. While this may not be a pleasant process, it's a necessary step to help you get a feel for where and how you're spending your money. Once you do this, you can begin to establish a realistic budget that includes regularly setting aside funds in a savings account.
- Tip: General Electric Credit Union’s (GECU) Money Management tool will categorize your spending and provide you with visuals that can be useful for strategizing future purchases.
2. Create a realistic budget
For many people, the word "budget" conjures up feelings of unease, but you must shift your perspective. A budget is a spending plan that helps you channel your resources toward productive financial goals. Without it, you may be throwing money down the drain that you could use to get ahead.
While setting up a budget, think about how you can cut spending in various categories such as: food, entertainment, and utilities. For example, you can choose to bring your lunch instead of eating out three or four days a week; explore different options to reduce your cable bill via bundling; or get creative to save on groceries. As you begin to free up money from these different spending categories, you can direct those funds into a savings account.
3. Start paying yourself first
This is one of the golden keys to saving money. If you pay everything else first and then see if you have anything remaining to put into savings, you will almost always have nothing left over. It is best to allot money for savings right when you get paid. Decide on a certain percentage of your paycheck and immediately send those funds to your savings account.
Take advantage of automatic transfers in your mobile banking app to automatically transfer an amount to your savings when you get paid. If you feel this percentage is too high in light of your current expenses, don't be afraid to start small. For example, if 10% of your paycheck is too much, go for five percent or even one percent, as you can always increase the number over time.
The amount is not as important as establishing a habit of saving. The goal is to make saving money a regular part of your life, to the point where it's practically second nature.
4. Take advantage of opportunities to jump-start or boost your savings
For example, you could send a large chunk of your tax refund to your savings account. Or, if you receive a year-end bonus, that's the perfect opportunity to beef up your savings.
Certificates are another easy, straight-forward way to save and earn. With GECU's certificates, you can earn even more on your deposited funds over a fixed period. This virtually risk-free savings option allows you to make money off your balance and can be opened with as little as $500. Check out some common myths associated with this savings option here.
5. Be willing to sacrifice
When you're looking for ways to maximize your savings, ask yourself what's more important, temporary convenience or long-term financial stability? To effectively save, you may need to "tighten your belt" to get your spending and savings under control.
If this means cutting back on certain social activities or taking a "staycation" instead of an out-of-town vacation, it's worth it if it puts you on the path toward financial security. If you're ready to improve your financial well-being, the tips outlined above can definitely get you started on the right track. Whether you're starting early or later in life, it's never too late to begin developing good spending and saving habits, so you can have a more stable and fulfilling financial future.
GECU believes in Improving the Quality of Financial Lives, and helping you save or build an emergency fund is just one piece of the puzzle. Programs like Round-Up put saving on autopilot by rounding up purchases in your checking account to the nearest dollar and depositing the change into a GECU savings account.2 Plus, our interest-earning savings accounts reward you for growing your balance. Start experiencing the credit union difference and become a member today. You’re eligible for membership if you live, work, worship, or go to school in select Ohio, Indiana, and Kentucky counties.