We all know it’s something we should do, but much like drinking 8 glasses of water a day, turning off our phones an hour before bed, and hitting the gym 4–5 times a week, we don’t always save as often or as regularly as we should. Just like coffee limits our hydration, Instagram stops us from unplugging, and Netflix spoils our fitness goals, overspending can prevent us from saving.
If you’re tired of spending when you should be saving, take a look at this quick guide. It can outline an easy path towards squirreling away some extra cash for a rainy day.
- Find a Dedicated Savings Account
When you only have one bank account for all of your expenses and income, things can get a little muddied. It can be a challenge to tell what money is meant for fixed expenses like rent and what cash is reserved for goals like a savings account. It helps if you can find an account that offers the highest interest possible for your expected account balance, which may be hard if you don’t have much to begin with.
While you’re searching out accounts, consider a 401(k). These tax deferred plans can grow untouched earning interest until retirement. Your employer may also make matching contributions to help grow this fund.
- Make a Budget
You won’t know how much you can send to this new savings account or 401(k) until you know exactly how much cash is left over after your fixed and variable expenses. Start by tracking every purchase you made over the last 6 months and organize them into different categories like rent, utilities, and even clothes. Once you have a tally for each category, you can see where the majority of your cash is going. This should alert you of any categories in which you’re overspending.
If rent ends up taking 70% of your monthly income, it’s time to start looking for a new, cheaper place. This exercise also helps determine if you’re wasting money by indulging in bad spending habits. If you discover you spend a lot on unnecessary takeout, Starbucks, or other impulse buys, try to eliminate these from your routine and redirect this cash towards savings.
- Automate Savings
This next step is a convenient way to stick to your goal without it taking over your every waking moment. It will also help prevent using funds you would transfer to your savings on something else, like a brand new pair of Nike VaporMax sneakers. Go through your bank account and set up pre-authorized payments to your savings. To get the full benefit of this process, automate all of your recurrent bills this way. You’ll never go over a due date again.
- Use Installment Loans
A learning curve awaits you if you aren’t used to money automatically coming out of your account. It’s easy to unknowingly use the money you’ve dedicated to an automated payment on another expense. If you’re on a tight budget, this mix up may leave your account short of what it needs in order to complete these auto pre-authorized payments, and you could face a penalty for overdrawing your account.
Until you iron out these glitches, use an installment loan to cover unexpected purchases, bills, or repairs that could otherwise put your auto payments at risk. A Credit Access Business such as MoneyKey will facilitate these loans on your behalf, securing as much as $1,000 for when you need it most. The advantage of an installment loan from MoneyKey over other cash advances is its repayment terms. Rather than having to repay the entirety of the loan back in one lump sum, you can defer its payment over several installments.
Payments broken up over time will have less of an impact on your budget. If you remember, that’s what this whole guide is all about — developing a plan that will help eliminate cash drains from your budget so you can start saving. Don’t put it off any longer. Start at step 1 and keep going. Compared to turning your phone off before you go to bed, your savings plan will be a breeze.