How can those who currently aren’t saving afford to save money? And how can those saving only a little save more? Here are ten tips from America Saves for saving money when budgets are tight.
1. Find small savings that add up to big savings over time
Keep a careful record of all of your spending for a month. You may be surprised to learn how much you are spending on dining out, daily drinks or snacks, or impulse purchases. One method is to save all your bills and receipts over the month and stack them into categories like “utilities” and “groceries.” If you find a few expenditures you can do without, put that amount into savings.
2. Comparison shop to find the lowest prices
When you compare prices at different stores before making a purchase, you can often find lower prices for necessary purchases — such as food, transportation, and insurance— leaving you more money to save. Bonus tip: Take a list with you to the grocery store and stick to it. This will help you from buying items you don’t need.
3. Limit spending on gifts.
Limit spending for birthdays and holidays like Christmas and Valentine’s Day. Friends and family are more likely to appreciate a few well-chosen gifts than a more costly pile of gifts chosen thoughtlessly in a mall shopping spree.
4. Put all your loose change in a savings account.
My husband and I did this over Christmas break. I rolled all the coins that had piled up in a dish on his desk for a little less than a year. His loose change added up to $53 which we tucked away in our savings account. For some people, loose change could add up to over $100 a year. That’s enough to jump start your savings program.
5: Ask your bank or credit union to automatically transfer funds each month from your checking to your savings account.
The easiest and most effective way to save is automatically. Even as little as $10 or $15 a month helps. After all, that’s $120 or $180 a year. Ask your financial institution to automatically transfer a certain amount from your checking account into your savings account at the beginning of each pay period. If you don’t see it, maybe you won’t be tempted to spend it. Paying yourself first is more effective than waiting to save whatever you might have leftover at the end of the month– because too often there may not be anything left to save!
6: Build an emergency fund to avoid having to take out loans to pay for unexpected expenses.
We all have those unplanned expenses– car repairs, a medical bill, a broken washing machine. Saving for emergencies helps you avoid going into debt to deal with the expense. Emergency savings are usually best kept in a savings account, despite the low interest rates these accounts pay, because they are easy to access when you need it. Remember, keep a high enough balance in the account to avoid monthly fees.
7: Avoid using high-interest credit card and payday loans.
Payday loans typically charge interest rates of 500 percent, and the interest rate on credit card debt can run 25 percent. You can save hundreds, perhaps thousands, of dollars a year by paying off these high-cost debts and starting an emergency fund to cover future expenses.
8: See if you qualify for an Earned Income Tax Credit.
Many low- and moderate-income workers qualify for an Earned Income Tax Credit (EITC) that can be over $1,000, and often more than $2,000. IRS Publication 596 explains how to apply, or you can contact your local tax payer assistance center for in-person help. Even if you haven’t qualified in the past, it is worth considering the EITC each year, especially if your income has dropped, you’ve had a child or other qualifying financial change. Then pay down debt and build savings with at least half of the money you receive from this credit.
9: Split your income tax refund to deposit some directly into savings. Taxpayers who are due to receive a tax refund can direct-deposit a portion of that refund directly into existing savings or investment accounts, or use some of the refund to purchase U.S. Savings Bonds. IRS Form 8888 tells how to split your refund, because if you don’t see it, you may not be as likely to spend it.
10: Take advantage of any matches to retirement savings contributions at work.
Some employers match up to 100 percent of your retirement contributions, others match less. But whatever the amount, if you’re not contributing up to their match, you’re leaving money on the table. Talk to your employer to explore retirement savings options at work.
Looking for more savings tips? Here are over 50 additional tips for reducing spending and increasing savings from the America Saves program: https://americasaves.org/for-savers/make-a-plan-how-to-save-money/54-ways-to-save-money.
Are you ready to make a commitment to save money or pay down debt?
Take the America Saves Pledge to receive emails, text messages, and savings challenges to support and motivate you to save or pay down debt. Consider us your personal savings system. And the best part is it’s completely free. You can connect to America Saves through our Kansas Saves website from K-State Research and Extension. Find the saver’s pledge and other helpful resources at www.kansassaves.org. Happy saving!
Linda K. Beech is Ellis County Extension Agent for Family and Consumer Sciences.