One of the hardest things is wanting to save but not being sure about how to go about it. It feels like all of the books about money and investing are written for people whose jobs pay them six figures. They all say things like “you can totally buy that brand new $100 sweater and save for a Maserati! We’ll show you how!†Where is all the advice for people whose budgets and needs are more about groceries and mortgage payments?
Right Here.
Step One: Open a savings account at your bank and link it to your checking account. You don’t need anything fancy right now; a basic account will do—especially if you can’t afford a hefty initial deposit. When you open the account, check the fees to make sure you don’t get dinged for a low balance. You can usually avoid these by setting up direct deposit or finding a free checking option.
Tip: Go after the highest interest rate you can get for the lowest carried balance/initial deposit you can manage. Make sure your interest rate is a compound interest rate so you can save as much as possible.
Step Two: Set up an automatic transfer from your checking account to your savings account. This can be weekly or monthly. Most financial advisers will tell you that you want to save at least 10% of what you earn. You might not be able to afford that right now, though, so any little bit will help. Aim for at least $50-$100 a month (which works out to $12.50-$25 per week) to build your account up as quickly as possible.
Step Three: Set up a budget. Tack on 5% more than you think you will actually need to pay on each of your bills. This way you don’t have to worry about paying too much money and throwing your budget off track if a bill is a little bit higher than normal, you won’t panic because you’ll have that money already set aside. If it isn’t high or is lower than usual, transfer the “gap†to your savings account.
Pro Tip: As you pay off your bills, continue paying your monthly payment—just pay it into your savings account. This way your budget stays the same and you save even more money!
Step Four: Each day, transfer the “cents†of your checking account to your savings account. For example, when you check your checking account balance in the morning and see $178.59, transfer those 59 cents to your savings account. Trust me: this adds up over time.
Step Five: Take advantage of other savings plans at your bank as you can afford them. The best one to start with is the CD. Go after the best CD rate you can get and still have a sizable amount of money left in your regular savings account, “just in case.†After your CD has matured, deposit 10% of what you’ve saved via the CD into your savings account and roll the rest over into a higher yield CD.
Saving money is not something that only the very wealthy can do. It’s something that even people on the tightest budgets can accommodate. Remember: even a little bit of saving is better than no saving at all, so get started.
