By Frances O’Rourke – KeyBank Capital Region Market President & Regional Sales Leader, Key Private Bank
Everyone’s financial picture is different – but one thing most Americans have in common is a desire to increase their savings. But saving can be tough with rising costs spreading throughout the economy.
Results from a nationwide Bankrate poll1, from June 2022, show just 23% of households self-reported having no emergency savings at all. The findings are down from 25% reported in 2021, and it’s among the lowest levels recorded during the 12 years that Bankrate has conducted the poll.
Day-to-day, it can feel difficult to know where to begin increasing your savings – or even simply where to get started. The good news is, no matter where you are on your savings journey, these realistic, manageable and practical steps from KeyBank can help make saving money easier.
Start with the end in mind
The first step is to set a realistic goal and create some scenarios for how to reach it. For example, if you want to save $500, then consider saving $5 per day for 100 days – just a little over three months. Or save $2.50 per day for 200 days – you’ll reach $500 in a little more than half a year.
Free up cash
Take a good look at what you pay and why, make changes where you can, and add the difference to your savings:
> Evaluate your household utility costs and budget: Can you save on water or electricity by using less? Are you consolidating trips by car to spend less on gas? How often do you eat out per week?
> Monitor regular subscriptions and fees to make sure you haven’t forgotten to cancel a free trial of an app or service.
> Consolidate your debt for lower interest rates or a shorter payoff time.
> Streamline mortgage costs by looking into refinancing your home or shopping for a better deal on homeowners insurance.
Have a plan for extra income
It’s tempting to look at a bonus check from work or an annual tax refund as a chance to splurge. And while it’s fine to use some of it to treat yourself and your family to something special, planning ahead to put most – or all – of it in your savings account can be a big step toward meeting your savings goals.
You could also use incremental income to pay off debt, add it to a retirement account or college fund, prepay your mortgage or make an investment in your home or a Health Savings Account. There are a lot of possibilities, but the important thing is to have a plan for these influxes and to stick to it when the cash arrives.
Save automatically, a little bit at a time
There are a couple of ways to set aside money without thinking (much) about it. If you have a paycheck direct deposited into a checking account, you can adjust it so that a small amount goes into a savings account each pay period.
There are also banking apps and options that can place small amounts in your savings account when you make purchases. For example, KeyBank’s EasyUp® allows you to set an amount – anywhere between 10 cents and 5 dollars – that will be transferred from your checking account to your savings every time you make a debit card purchase.
Check progress and make adjustments
Achieving your savings goals requires regularly checking on your progress. Did you stay on track last week to hit your monthly target? If something unexpected meant lowering your savings contribution last month, what can you do this month to make it up?
Thinking in terms of maintaining progress over time helps establish the financial habits needed to build up the savings you’re aiming for.
Your Financial Future
Remember that goals can change. There are a multitude of approaches to saving money, so be open to learning about new and different methods of building for a stronger financial future. They often revolve around the key savings contributors of setting goals, planning how to allocate incoming funds – such as tax refunds – and committing to a plan.
About the author: Frances O’Rourke is KeyBank Capital Region market president and Key Private Bank regional sales leader. She can be reached at 518-257-8733 or [email protected].
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
1: Survey: Majority of US households uneasy with level of emergency savings. Bankrate. June 2022.https://www.bankrate.com/banking/savings/financial-security-emergency-savings-june-2022/
Content based on: https://www.key.com/personal/financial-wellness/articles/practical-steps-make-saving-money-easier.html
Common Financial Mistakes and How to Avoid Them
What’s most important is learning from mistakes and understanding how to avoid them. Doing this will help you make the most of your finances, such as putting more money toward savings or paying down debt.
Let’s look at some common financial mistakes that consumers make and how you can avoid them.
Spending on indulgences
You grab a drive-thru coffee for your commute; pick up sandwiches on the way home; catch a late-night movie every couple of weeks. These are small indulgences, but it’s important to keep track of them so you know the part they play in your overall money habits. Spending just $25 a week on dining out adds up to $1,300 a year.
How to avoid: You don’t have to cut out these treats, but you should come up with a monthly sum in advance, include it in your budget and then stick to it. Familiarize yourself with a 50/30/20 budget plan to help organize your finances and clarify your expenses.
Making never-ending payments
The total cost of subscriptions like gym memberships, music streaming services and meal kits can add up quickly and take a sizable chunk out of your monthly budget.
How to avoid: Evaluate your subscription services and be honest with yourself to make sure that you are only paying for the ones you want and use. Cancel the ones you don’t.
Leaving money on the table
Are you investing the maximum amount in your 401(k) plan? Employer contributions are effectively part of your salary that you might be missing out on. If your employer matches any portion of your contribution to your 401(k), then consider maximizing the amount you contribute.
How to avoid: Start with what you can contribute now, increasing as soon as you can to the maximum that your employer will match, as applicable.
Postponing retirement savings
While paying off debt tends to be a high priority for people – as it should be – it’s best to start saving for retirement as soon as possible. Retirement funds will grow at a much faster rate the sooner you start.
How to avoid: Start with a fund like an Individual Retirement Account (IRA) or a Roth IRA, and talk to a financial advisor to create a plan based on your situation and needs.