When you’re trying to save, it can feel like you will never get ahead. If you wish you could save more, you are not alone. More than half of Americans have less than $1,000 in their savings account.[i]
If you’re struggling to save, it may be time to try paying yourself first. This doesn’t mean you get to go on a shopping spree before paying your bills. The Pay Yourself First strategy focuses on moving a portion of each paycheck to your savings account. Automating your savings can help you avoid overspending and make your savings goals easier to reach.
Whether you are saving for retirement, an emergency fund, or a dream trip around the world, the Pay Yourself First Strategy makes it easy to put money aside without having to think about it. Try these five tips to start boosting your savings immediately.
1. Talk to HR
The easiest way to begin paying yourself first is by automatically depositing money directly from your paycheck into a savings account. If you are looking to save for retirement, find out whether your employer offers a 401(k) or tax-incentivized program into which you can have a percentage of your paycheck deposited each pay period.
If you’re saving for other purposes, ask whether you have the ability to split your direct deposit into multiple accounts. Sending a specific dollar amount or percentage of your paycheck directly to your savings will ensure that you never miss an opportunity to save.
2. Every Goal Gets an Account
What are you saving for? Retirement? A trip around the world? An emergency fund? No matter what it is, if your goal important enough for you to save for it, it deserves its own account.
Get started with a Smart Savings Account to avoid minimum deposit requirement or monthly fees. This allows you to start small so you can build your savings whether you are depositing $10 or $1,000 each paycheck. It can be hard to put money aside at the end of each month. Move your money into your accounts first thing each payday to help you get used to spending less.
Does putting money in a savings account seem less than appealing? Try renaming your accounts to remind you what you are saving for. While it may be easy to transfer $200 from your “Savings” account, you might think twice before transferring the same amount your “Honeymoon in Tahiti” account. Saving doesn’t have to be boring. Remind yourself what you’re working toward.
3. Out of Sight, Out of Mind
If you are always tempted to tap into your savings, you may want to try making it harder to access your money. An online savings account takes away the ability to visit a local branch where you can easily tap into your funds. You can even provide an extra layer of spending protection by opting out of your account’s free ATM card.
You will thank yourself for protecting your savings when a true emergency comes up that requires your “rainy day” fund.
4. Don’t Adjust Your Budget
Are you due for a raise or a large bonus? Don’t start adjusting your expenses now that you will have more money. Instead, reallocate your funds to keep your take-home pay the same and increase the amount you put into your savings account.
If you are expecting a 3 percent raise at work, find out whether you can raise your 401(k) deposit by 3 percent. You won’t feel the difference, but your retirement savings will.
Be on the watch for ways you can lessen your expenses and put more money into your Pay Yourself First savings plan.
5. Earn More by Doing Less
We know that saving is hard. Try making it easier on yourself by finding ways to maximize your savings without having to think about it.
The national average for a savings account is 0.06%.I iBank of Internet USA’s Smart Savings boasts interest rates of over 1%. If you put $5,000 in a savings account with .06% returns you would earn an extra $3 over a year. However, a Smart Savings account with a 1.05% APY and interest compounded daily will earn an extra $52.78 each year. Who couldn’t use an extra $50?
Another way to make your money go a little further by doing less is to choose a tax incentive plan such as a 401(k) to boost your savings. A 401(k) withdrawal funds before taxes which allows you to save more by reducing your taxable income. Depending on your tax bracket, a $100 contribution to your 401(k) may only result in $60 to $80 less in your paycheck.
Are you ready to start your Pay Yourself First savings plan? Open up a Smart Savings Account today and set up your automatic transfers so that you can start reaching your savings goals. For further information about the Smart Savings Account, please contact Bank of Internet USA by telephone 1-877-541-2634 or by email at email@example.com.