One of my resolutions this year is to save more money – Single Mom New Year’s Resolutions – and I have been thinking about the best way to do just that – how to save money.
How can I go about growing a savings account when I am also trying to finish paying off debt? Are those two things mutually exclusive? Which is the more important goal to focus on – becoming debt-free or growing my savings account?
I feel you can do both, within reason. The first priority when you are getting free from debt is to have an emergency fund in place. It’s the first “baby step” that Dave Ramsey suggests in his Money Makeover. Read about my own tips for putting together your emergency fund.
So once you have your emergency fund established, and you are focused on eliminating debt, what do you do about savings? Does that completely go away until you are fully debt-free?
It doesn’t have to. Sure, your main focus is to get rid of the debt (and the accruing interest) as quickly as possible – debt sucks the life out of your finances, and creates stress in your life.
Who wants that?!?!
Your goal is to free up as much money as possible to reduce your debt. The Debt Snowball Technique is great for this. Here is how I have use it to help me eliminate debt.
But there are a few easy ways to save money during and after your debt reduction phase. Dare I say, they are painless?
How To Save Money Tip #1
The best way I have found to save money and keep it painless is to automate it. If it’s automatic, and you don’t have to think about it and do anything each money to save money, it becomes a non-issue. The money goes into your savings account, and you don’t even have to think about it.
If you don’t have an automatic transfer set up between your checking and savings account – YOU SHOULD!
DO IT NOW!
Set up the automatic transfer for once (or twice) a month, depending upon when and how often you get paid. I have mine set up for the 5th of every month. I get paid once a month, on the 1st of the month. I set up the transfer for the 5th to make sure the transfer takes place AFTER my check hits my checking account. My bills are all scheduled to be paid around the 5th, so when I pay my bills I also “pay” myself with the deposit into my savings account.
The transfer to my savings account is on my budget worksheet, and figured into my spending each month. I know some people may say to wait until the end of the month and put what’s left over in their checking account into savings. But honestly – who ever has any money left over at the end of the month?!?!
You don’t have to put much into your savings account each month. Ten dollars, $20, $25? As long as it’s consistent, your savings account will grow. Ten dollars each month will be $120 by the end of the year. Twenty dollars will be $240. Twenty dollars will be $300. You get the idea. That may not sound like much, but it’s $300 more than you had in January, and $300 more than you will have if you do nothing! And the magic of compound interest (although not so magical lately) will grow the amount even faster each month you deposit.
How To Save Money Tip #2
Speaking of automating your saving, why not automate your bill paying? This allows you to cross one more item off your TO DO list. No more late payments? No more late payment fees? YES, PLEASE!
Most banks give you the ability to bank online, and schedule automatic payments to billers. This is especially handy for bills that are the same amount each month. Payments like rent, gym membership, car payment (if you still have one), mortgage payment, etc. are all good candidates for automatic payment. Here are a couple posts I have written about easier bill paying, and simplifying a money makeover.
How To Save Money Tip #3
One more hint about automatic payments – set up a Christmas account! This will help you save for Christmas, and it’s (again) painless. Just set up an automatic transfer of $10/$20/$25 each month into a special account set aside for Christmas. Many banks have them. My bank’s Christmas accounts are set up so they can’t be accessed until November, so there’s no worries about raiding the account prior. Then in November the money in the account is automatically rolled back into your checking account to be used. This is also a great way to save for other annual expenses, like property taxes. Mine are always due in November, and I hate paying them. Planning ahead makes it a little easier, so I am not raiding my regular savings account.
Saving money can be really challenging at times. It seems like I always am able make a good start at saving some money, but I manage to get sidetracked a month or two after with an unexpected expense. But a little bit of planning ahead of time helps to lessen the blow of that expense – especially on my bank account!