Savers finally have the wind at their back. The trick now is to become a saver in the first place.
After years of near-zero interest rates, you can find savings accounts yielding 5%. However, banks offer these high rates in response to the Federal Reserve raising borrowing costs to moderate sky-high inflation; a phenomenon that has made it difficult for Americans to save over the past few years and caused so many to wrack up debt.
Still, you can save more. The trick is being conscious of your spending decisions, keeping a goal in mind and believing that you can succeed.
Go through your budget
Before you start saving, it’s a good idea to review (or establish) your budget and figure out how much you can stash away. (If you don’t follow a budget presently, you are not alone: Nearly three-quarters of Americans don’t, according to one survey. Still, you’re better off knowing where your money is going than living in mystery.)
One easy budgeting strategy is the 50/30/20 rule, where you split your take-home pay into three categories:
- 50% goes toward essentials.
- 30% goes toward wants.
- 20% goes toward debt repayment and savings.
It may take a few months to truly understand your spending, but go through your transactions and consider where you can cut back. It doesn’t have to be extreme; even small reductions in spending will add up.
Also, be on the lookout to earn more. If you get some additional income, save it instead of increasing your lifestyle.
Find out where you overspend
As you learn more about your spending habits, you may find you have one or two problem areas that need attention. Most of us have that one thing we spend too much money on, whether it’s restaurant trips or impulse Amazon purchases.
“It’s helpful to identify what your personal traps are and then set limits around them,” said Trae Bodge, a retail and money-saving expert.
For example, you can give yourself a reasonable monthly allowance for these luxuries and track your expenses regularly, which can help you see if you’re in danger of going over-budget. By meeting those goals, you’ll give yourself the confidence that you can get your spending on track.
Spending “hurdles” can help, too. For instance, you can delay discretionary purchases by a certain time frame, remove shopping apps from your phone and unsubscribe from marketing emails.
